Today’s trade news includes confirmation that European institutions have approved the EU’s trade deal with the US to reduce Trump-imposed tariffs, while the Gulf Cooperation Council (GCC) may have accidentally spilled the announcement of a trade agreement with the UK.
In domestic news, the UK received an unexpected boost after the rate of inflation looks to have fallen last month.
EU-US
European institutions have reached a provisional deal on implementing the EU-US trade agreement.
In a statement from the European Council, the Cypriot commerce minister, Michael Damianos, confirmed that an agreement had been struck to implement the “tariff-related aspects of the EU-US Joint Statement”.
The agreement between EU institutions introduced a “robust safeguard mechanism”, which gives the EU the power to suspend parts of the trade deal if the US “fails to meet the commitments” or does anything to undermine its objectives. Additionally, there is a sunset clause that brings the agreement to an end by 2029 unless further action is taken.
Damianos added:
“We have ensured in our agreement robust safeguards to be able to protect European interests, businesses and workers.”
Even this week, the US ambassador to the EU, Andrew Puzder, wrote an op-ed accusing the EU of “dragging its feet for months as it enjoyed the benefits of a US-EU trade deal it agreed to without delivering its side of the bargain”.
US President Donald Trump had threatened to hike tariffs on EU automotive imports into the US to 25% if a deal was not struck by July.
UK-GCC
The GCC posted, then deleted, an announcement that a trade deal with the UK has been agreed.
In the deleted post, the secretariat of the GCC said that an agreement would be signed between the two parties today in London.
“The signing of the FTA comes after a series of intensive rounds of negotiations and meetings between both sides, reflecting their shared commitment to bolstering the GCC-British strategic partnership and elevating economic, commercial, and investment ties to broader horizons, thereby achieving their mutual interests,” said GCC secretary general Jasem Mohamed Albudai in the now-removed announcement.
The Saudi state press agency has also quoted Albuldaiwi saying that the deal would be signed today. However, Politico’s Morning Trade email said that meetings between officials on both sides would run throughout the week.
The Department for Business and Trade (DBT) has been approached for comment.
Hopes had been raised at the start of this week that a deal might be in the offing, as British and Gulf officials talked up the progress that had been made during negotiations, which started in 2022 under the previous Conservative administration. UK officials have also cautioned that there are still issues to be resolved.
Inflation falls
UK inflation fell unexpectedly in April, despite the ongoing effect of the war in the Middle East.
According to the latest data from the Office for National Statistics (ONS), inflation rose by only 2.8% last month, down from the previous reading of 3.3%.
The ONS said that housing costs and household services offset an increase in motor fuel prices. Core inflation, which excludes energy, food, alcohol and tobacco, also rose by a lower rate of 2.5%.
Chancellor Rachel Reeves says "we have the right economic plan" following the news, hailing decisions she made in last year’s budget. She said she would announce “the new phase of how we will support UK households” over today and tomorrow.
Shadow chancellor Mel Stride said that the news was “welcome” but that “prices are still rising too far too fast”.
James Smith, an economist at Dutch banking house ING, said that combined with yesterday’s poor jobs numbers, the news “questions the need for aggressive rate hikes.”
“We continue to think markets are overestimating the Bank of England’s willingness to tighten policy, at current levels of energy prices. Investors are pricing between two and three rate rises by next spring.”
Bloomberg economists said that: “The softness in recent labour market data and downside surprise in April’s CPI data tip the balance toward a July move, rather than a hike in June, which was our previous expectation.”
Research released yesterday (19 May) by the RAC found that petrol and diesel have risen to their highest price since the start of the Iran war.
Other news
- Greater Manchester mayor Andy Burnham has been confirmed as Labour’s candidate for the Makerfield by-election
- Chesire-based Packaging One has secured a £4m contract export contract, backed by a guarantee from UK Export Finance, the agency said
- John Swinney has been re-appointed as first minister of Scotland after winning a nomination vote in the Scottish parliament
Yesterday in trade
- EU trade commissioner Maroš Šefčovič announced new regulations to limit the number of components European companies can buy from a single supplier
- European figures warned that the UK would not receive the same terms if the UK in the future seeks to rejoin the EU
- The US’ suspension of Russian oil sanctions was extended another 30 days
