Eighty-Twenty Split

Commentary by William Alan Reinsch

Published May 12, 2025

I had planned to follow up last week's column on deal-making by writing about China, which is a special case in the tariff drama. However, as usually happens with the Trump administration, plans are overtaken by reality. Trump seems to be incapable of leaving any thought unexpressed and is, on average, announcing a new trade action every three days, which means a weekly column has plenty to write about. Last week featured the conclusion of the first trade deal, and the lucky winner was the United Kingdom.

While there are features of the agreement that are unique to the United Kingdom, it also contains some useful lessons for other countries lining up to make deals. First is nomenclature. Apparently, these things are going to be called Economic Prosperity Deals (EPDs). Second is legal status. The text makes clear that it is not a legally binding agreement, which should cause other countries to pause and wonder how long whatever they agree to will last. A logical question to ask during the negotiations is whether the Trump administration will commit to sticking with the deal and not move the goalposts at some later date. It appears, so far, that the answer to that will be "no." That should also give our negotiating partners pause.

Third, and much more important, the agreement contains a mix of substantive commitments and promises to agree on details in the future. On that, I feel somewhat vindicated, since I had predicted the agreements would be largely anticipatory, with a few substantive elements thrown in to make sure they pass the laugh test. In the UK EPD, the United Kingdom agreed to remove its tariff on U.S. beef, while the United States will create a preferential quota for UK beef imports. The United Kingdom will also provide a preferential duty-free tariff rate quote (TRQ) of 1.4 billion liters for U.S. ethanol as well as buy $1 billion of aircraft from Boeing. In return, the United States provided a tariff rate quota for autos-up to 100,000 can come in with a 10 percent tariff rather than the 25 percent everyone else will pay. It also promised a parallel rate for associated auto parts. In addition, once the United Kingdom meets some unspecified security requirements, the United States will provide a quota for UK steel and aluminum and unspecified downstream products at most-favored nation (MFN) tariff rates.

In addition, the United States promised, sort of, to negotiate preferential treatment on pharmaceuticals once unspecified supply chain security requirements are met. That commitment, however, depends on the outcome of the Section 232 investigation into pharmaceuticals.

Fourth, there were things that both sides did not concede. The overall U.S. tariff level will remain at 10 percent, and the United Kingdom will retain its digital services tax. Both sides agreed to honor each other's sanitary and phytosanitary standards, which means our chickens will still not be getting in. Also missing are deadlines. The word "promptly" occasionally appears, but there are no specific time limits on any promised action.

Beyond that, most of the remaining language is essentially hortatory-commitments to consider, discuss principles, negotiate, cooperate, and so on across a variety of issues, including digital trade. Most of them relate to non-tariff barriers.

It is also noteworthy that most of the specific commitments were made on a preferential, as opposed to MFN, basis. In other words, the concessions apply only between the United States and the United Kingdom and not to anyone else. That is not good news for those who support trade liberalization, but it is also no surprise. The administration crossed that Rubicon in Trump's first term, and the Biden administration continued it. Here at CSIS, our Commission on Affirming American Leadership in its 2021 report recommended an approach where countries prepared to make deeper commitments would do so on a non-MFN basis. We were aiming for more trade liberalization rather than less, but either way, this appears to be the direction the trading system is going. It is what we should expect from the other EPDs that will be negotiated.

Other countries should study this agreement carefully because it signals what they will confront. Essentially, the agreement is an 80-20 split. About 20 percent of it involves substantive commitments by the two sides, and 80 percent is a series of commitments to address issues in the future, subject to various conditions or contingent on future events. That means countries should prioritize what they want. They will not be getting everything, but they will be getting something. It appears that the United States is willing to make a few modest concessions, although their economic impact will be minimal in the UK case. So far, however, it does not look like countries will get their tariffs below the 10 percent level.

Finally, countries should learn from the rollout. For Trump, the show is more important than the substance. He wants an Oval Office press conference where he can claim victory and say the agreement is the greatest ever (until the next one). The content of the agreement is less important. Countries may find that if they are willing to give him the appearance of victory, they may end up with more substance.

William A. Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

Programs & Projects