Are Trade Deals Growth Drivers? Unpacking the Promise and Pitfalls of Recent Agreements

CREATED BY ROGER EDDOWES Published: 02/06/2025 @ 09:01AM #AreTradeDealsGrowthDrivers #Economy #UKTrade #BrexitImpact #GlobalTrade

The recent trade deals signed by the UK with the US, India, and the EU prompt an essential inquiry: are trade deals growth drivers? While the government portrays these agreements as monumental victories, I think the reality is far more complex ...

Are trade deals growth drivers? Do they hinder growth? That's the economy's dance

Trade deals are often heralded as transformative; a new dawn of economic prosperity. The UK government's recent flurry of agreements with the United States, India, and the European Union is no exception. However, as the dust settles, I find myself asking, "Are trade deals really growth drivers?" They seem to be a mixture of optimism intertwined with disappointment.

The impetus behind the UK's rapid trade
negotiations is twofold!

Primarily, the government seeks to offset the ramifications of Donald Trump's erratic trade policies, which have ensnared the global economy in a labyrinth of tariffs. The aspirations for economic rejuvenation stem primarily from the desire to deliver tangible growth following Brexit. UK officials tout the potential for these deals to enhance growth projections, invigorate fiscal leeway, and bolster revenues. Yet, the reality appears less rosy when I think about it.

First and foremost, the bulk of the agreements are limited in their scope. Each one contains nuances and politically sensitive facets that could potentially undermine the gains they claim to deliver. Much of the content within these deals reflects intentions rather than solid commitments. This vagueness raises concerns about their effectiveness in truly revitalising the UK economy.

An example of this lies with the trade deal established with the United States. Initially perceived as a chance for the UK to boost its economic standing, the agreement has ultimately proved to be somewhat lacklustre. While it has successfully dismantled punitive tariffs - such as the 25% weight on steel, aluminium, and vehicles - these concessions come with caveats.

The favourable rates apply only to the first 100,000 cars shipped, limiting the possible gains. British goods still face a 10% tariff in the US, diminishing the likelihood of significant enhancements in UK economic growth. In fact, the impact is particularly evident for companies like Diageo, which faces an annual tariff bill of £112 million on its goods destined for the US market. Such burdens could prompt firms to reconsider their production strategies, possibly leading to a relocation out of the UK.

In contrast, the deal with India, while seemingly beneficial, also presents a mixed bag. British exports to India totalled over £17 billion last year; however, the Indian economy remains characterised by high protectionist measures, with tariffs soaring as high as 379%. Although the government projects that UK exports could increase by £15.7 billion a year by 2040, the trade deal's overall contribution to the UK's GDP is, according to HSBC, expected to be relatively modest at around 0.1%.

Established industries such as automotive, alcoholic beverages, and medical devices may well benefit, yet this gain is overshadowed by the sacrifices made, including reduced import barriers for US agricultural products.

Equally significant is the accord with the European
Union, the UK's largest trading partner!

This agreement represents 41% of all of our exports. The ramifications of Brexit remain evident, with studies indicating that the departure from the EU has indeed harmed the country's economy. This is further compounded by the Centre for European Reform's ‘doppelganger' modelling, which estimates a staggering £13.4 billion per quarter decrease in UK goods exports post-Brexit.

While I will always argue the resilience of UK-EU trade, these comparisons substantiate the assertion that withdrawal from the single market has indeed had adverse implications.

The Prime Minister has posited that the recent EU agreement will yield £9 billion in benefits annually by 2040. However, notable alterations like improved access to food and agricultural exports and enhanced defence collaboration come with their own set of complexities. For instance, food exports account for just 0.4% of the UK's GDP, meaning that any gains will only partially counterbalance the effects of Brexit. While the benefits brought about by easier business processes, particularly for smaller enterprises, are acknowledged, it remains critical to consider the inherent costs - both financial and political - with improved access to the EU.

Deutsche Bank estimates the long-term economic benefits of these trade deals could reach approximately 0.5% of GDP by 2040!

While these figures certainly reflect growth, they fall short of the ambitious growth projections set forth by the current government. I believe that, while the agreements are noteworthy, the actual growth they will catalyse may prove to be disappointingly minimal.

Admittedly, the potential for the UK economy to experience growth through these trade agreements exists, but expectations must be tempered with realism. As businesses grapple with the nuances of international trade dynamics, the question remains: are trade deals growth drivers? It would appear that the growth effects of these recent agreements could be eclipsed by the tariffs and systemic challenges that persist post-Brexit.

I believe that the UK's recent trade deals reflect
both ambition and caution!

As the economy continues to evolve, stakeholders will be watchful, seeking clear indicators of progress. The government may promise growth, but the pursuit of growth through trade deals may not yield the dividends that they originally anticipated.

I believe the real answer to whether trade deals are growth drivers will be revealed in the years to come, so we'll have to see what happens in the next couple of years.

I do find the whole subject quite fascinating.

Until next time ...

ROGER EDDOWES
Join our mailing list! Click here and be one of the first to know when we publish a new blog post!

Share the blog love ...

Buffer Facebook Twitter Linkedin Pinterest WhatsApp #AreTradeDealsGrowthDrivers #Economy #UKTrade #BrexitImpact #GlobalTrade

About Roger Eddowes ...
Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach. Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.

More blog posts for you to enjoy ...
		Inheritance Tax on pensions: What the 2027 rules mean for your family The rules surrounding Inheritance Tax on pensions are changing in 2027, and anyone hoping to leave their pension savings to loved ones should be aware of what lies ahead ......
		The 60% Tax Trap: Why Earning More Could Leave You Worse Off Most people assume that earning more means taking home more money. Unfortunately, the 60% tax trap reminds us that the UK tax system isn't always straightforward. For higher earners approaching £100,000, a pay rise or bonus c...
		Budget tax changes: What could they mean for businesses and investors? As the next budget approaches, speculation about tax changes is gaining momentum. The Chancellor faces a difficult balancing act: managing public finances, encouraging economic growth, and avoiding further pressure on busines...
		Working lunch tax rules: When do sandwiches become a tax problem? There is something wonderfully British about gathering colleagues around a table, ordering a few sandwiches and calling it a productive meeting. After all, everyone needs lunch, and discussing business while eating seems perf...
		State Pension Triple Lock changes: What could they mean for your finances The recently announced State Pension Triple Lock changes mark a significant shift in how the State Pension could increase in the future. The existing triple lock will remain in place until April 2030, but after that the earni...
		A Director's Loan Account is useful, but it isn't your personal ATM A director's loan account can be a normal, useful part of running a limited company. It records money moving between a director and their business that isn't salary, a dividend or reimbursement of a genuine business expense ....
		Is the State Pension triple lock sustainable for the long term? The state pension triple lock has played an important role in protecting pensioners from falling behind as wages and prices rise. For many people, particularly those with little other retirement income, that protection matter...
		Cybersecurity risks for businesses: Why basic protection matters more than ever Cybersecurity risks for businesses continue to evolve, and recent incidents show that it is no longer enough to think of cybersecurity as something that concerns only large organisations or technology companies. The ways a bu...

Other bloggers you may like ...
		What happens if you don't check in with YourPING? Posted by Steffi Lewis on https://www.yourping.uk Life gets busy, and even simple things can slip our minds. You might be enjoying a long conversation with a friend, working in the garden, watching a ...
		Are you an overseas visitor looking to stay in Milton Keynes? Posted by Emily Freeman on https://blog.shortstay-mk.co.uk Overseas visitors seeking a base in Milton Keynes will find we offer an exceptional range of serviced accommodation tailored to their needs. Discover ...
		Turning setbacks into opportunities: How difficult times can lead to new beginnings Posted by Dave Cordle on https://blog.davecordle.co.uk Life doesn't always go according to plan, does it? Sometimes events happen that completely knock us off course, whether that's redundancy, a business ...
		How charities and community groups can use our daily check-in service Posted by Steffi Lewis on https://www.yourping.uk Charities and community groups do extraordinary work supporting people who might otherwise feel isolated, overlooked, or disconnected. Whether helping ...