Positive signals from this week’s high-level UK-EU talks, as the bloc’s commissioner for finance called for greater defence and customs cooperation.
There’s greater harmony between the US and India, as US President Donald Trump agrees to substantially lower the tariffs he introduced last year, while the UK’s parliamentary committee on treaties has been reviewing the UK’s own deal with India.
EU-UK trade cooperation
Talks between senior UK and EU officials to progress the UK-EU sanitary and phytosanitary agreement planned following high-level meetings last year appear to be going well.
The EU’s commissioner for finance Valdis Dombrovskis told the BBC that the bloc is “ready to reengage” with the UK, going as far to propose exploring a joint customs union and welcoming the UK’s proposed entry into the European €150bn defence fund ‘Safe’.
His comments follow discussions held in London between him, UK chancellor Rachel Reeves and other senior ministers.
Calls for greater cooperation between the UK and EU have been growing within the UK, with justice secretary David Lammy and health secretary Wes Streeting both voicing their support, despite prime minister Sir Keir Starmer’s stance that pursuing a customs union goes against what Labour set out in its 2024 election manifesto.
In December, a private members’ bill requiring the government to begin negotiations on a new EU customs union was backed by 100 MPs, including 13 Labour ministers.
However, Starmer will welcome Dombrovskis’ comments on Safe. When asked about returning to talks with Europe on the defence pact during his recent trip to China, he said that both parties “need to do more on security and defence”.
He noted that recent increases in defence spending were a response to Trump’s foreign policy but added that “I think we need to go beyond that”.
US cuts India tariffs
A boost for India-US cooperation yesterday, as Trump agreed to significantly slash the tariffs he imposed on the country last year.
The punitive 25% levy introduced in response to Indian purchases of Russian oil has been removed after PM Narendra Modi agreed to stop buying the product. Trump also said that “out of friendship and respect for Prime Minister Modi” he would lower the reciprocal rate introduced to counteract India’s trade surplus from 25% to 18%.
Trump’s comments, made on his social media platform, Truth Social, also addressed Indian tariffs and non-tariff barriers on US goods. He claims that India will reduce both levies and barriers to zero and commit to buying “over $500 BILLION DOLLARS” of US goods, including agricultural, energy and tech products.
He added that India would buy more oil from the US, as well as “potentially” from Venezuela.
On X, Modi said he was “delighted” by the policy shift and gave “big thanks” to Trump “on behalf of the 1.4 billion people of India”.
“When two large economies and the world's largest democracies work together, it benefits our people and unlocks immense opportunities for mutually beneficial cooperation.”
The agreement just a week after the EU and India struck a trade deal designed to double European exports to India by 2032, which will see duties on almost all goods reduced.
UK-India agreement
On the subject on Indian trade deals, the agreement it signed last year with the UK has been reviewed by the UK’s International Agreements Committee.
The committee works scrutinises all treaties and agreements laid before parliament, offering an unbiased assessment.
In its report on the UK-India free trade agreement, the committee acknowledged the geopolitical value of a treaty with a friendly nation amid “growing protectionism and global instability”, over simply providing businesses with greater market access.
However, it also noted certain terms that disadvantage UK traders in comparison to their Indian counterparts. This includes the incremental lowering of Indian tariffs over 15 years, compared to the immediate UK market access many Indian businesses will benefit from.
In this context it noted the increased competition domestic producers will face, particularly those in the agricultural sector, and called for the government to produce an impact assessment on this and other trade deals on the UK agricultural sector.
The report also argues that key UK interests in services were omitted from the deal, including in the legal and financial sectors, along with a failure to conclude discussion on the mutual recognition of professional qualifications.
UK manufacturing boost
In more good news for the UK’s Labour government, as the latest manufacturing PMI from S&P suggests a strong economic start to the year.
The manufacturing PMI reached 51.8 – a 17-month high – driven by increases in output and new orders, which accelerated beyond previous months.
Significantly, new export orders rose for the first time in four years, with S&P Global Market Intelligence director Rob Dobson noting a wide range of new buyers, led by firms from Europe, China and the US.
“There was also a positive bounceback in business,” he added, “which rose to its highest level since before the 2024 Autumn Budget.”
Elsewhere in the headlines
- Beleaguered manufacturer British Steel has had interest from a British buyer following the UK government’s takeover of its Scunthorpe plant last year
- As the latest round of geopolitical uncertainty and US tariff threats comes to an end, safe-haven investments gold and silver prices slump
Yesterday in trade
The Week Ahead in International Trade anticipated:
- Critical mineral talks in Washington DC between the US and a number of large developed economies
- Japan’s upcoming election as new PM Sanae Takaichi looks to capitalise on high popularity ratings
- Outcomes from Starmer’s China trip, including a new bilateral services partnership
