Stocks experienced a boost on Thursday due to the announcement of a trade agreement between the U.S. and the U.K. This deal marked the conclusion to a month of negotiations, and it has now raised questions about whether future trade deals will continue to impress Wall Street.
The trade deal framework announced by the U.S. and U.K. includes provisions easing tariffs on automobiles, steel, and aluminum. It also opens up the British market to an estimated $6 billion worth of U.S. goods. Part of the deal involves a commitment by a U.K. airline to purchase over $10 billion worth of Boeing jets, a deal revealed by British Airways parent IAG on Friday.
However, the framework maintains a 10% tariff on all imports. According to Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics, this suggests that the overall rate will remain unchanged. The only significant tariff relief may be produced by de-escalation with China.
This weekend, American and Chinese officials will hold discussions in Switzerland. These will be the first talks since their reciprocal trade war began. The current situation with China is critical, as shipments from China to America reportedly decreased by more than 20% in April.
Many economists view the U.K. agreement as "low-hanging fruit". This is because the U.S. and U.K. share a long history of cooperation and a trade surplus. A similar agreement with China may pose greater difficulties due to the extent of trade and existing tensions between the two nations.
Despite the challenges, Trump suggested that the upcoming discussions with China could yield significant results. However, the scope of the U.K. deal might moderate expectations. It managed to steer clear of more contentious issues, such as opening healthcare markets to U.S. providers or the U.K.'s digital services tax.
Many economists have critiqued the new U.K. trade agreement for its lack of comprehensiveness, with a lack of clarity that fails to dispel uncertainty. Despite this, according to Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management, the U.K. trade deal may serve as a valuable model for what could be achieved going forward. Following this deal with additional agreements might significantly contribute to the recovery of the currently beleaguered stock market.