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This transcript has been generated using machine learning technology. While this technology was trained with CIBC terminology, it may contain errors.
Lisa Raitt: Thank you for tuning in to The Raitt Stuff. I&#8217;m your host Lisa Raitt and in this podcast I&#8217;m going to share insights on current hot topics in the areas of public policy, politics and business, with some guests along the way. Welcome back to The Raitt Stuff. I&#8217;m delighted to have with me today a returning guest, Amber Batool, who as you know is an Executive Director here at CIBC Capital Markets. Every time I have Amber on to talk about what&#8217;s happening in the United Kingdom and in Europe, I always get incredible amounts of response, people indicating how helpful they found it. So once again, I&#8217;ve called on her to come in and have a chat with us about the recent US-UK deal. Amber, of course, comes to us from the UK where she was a senior bureaucrat and worked in the administrations from Tony Blair to David Cameron and was chief of staff to several UK senior cabinet ministers working in the finance ministry, during the financial crisis in 2008. She came to Canada, has worked both in oil and gas in Alberta and in science, technology and early innovation here in Ontario. Amber, thanks so much for joining me today.
Amber Batool: It&#8217;s such a pleasure to be here and great to hear the feedback.
Lisa Raitt: So the US-UK deal was announced and look, there&#8217;s a lot of fanfare around it, but I guess what I was wondering was, is the deal significant? Is there anything in there that actually caught your eye?
Amber Batool: When you and I knew this deal was coming, we said we&#8217;d wait a few days in order to digest the details and really understand what there was behind it. Well, it turns out it was more of an amuse-bouche than a full meal. It was heralded as a major trade deal and a victory for both sides, but it wasn&#8217;t really. It was, as the president put it, the concept of a plan. And it will need negotiation, legalities, and congressional approval to take place before it can be finalized. So I think it would be fair to say it was more of a politically driven event, more significant for those politics, the optics, if you like, rather than the real economic impact of the deal. The US needed to sign its first trade deal since Liberation Day and the UK has been wanting this deal for close to a decade and given they recently signed a deal with India which they said would boost trade by an additional 25 billion by 2040, Prime Minister Starmer really wanted to maintain some momentum and I feel it definitely did do that.
Lisa Raitt: So politically, it&#8217;s a win for the UK.
Amber Batool: Yes, I think politically it is. I can talk about some of the details that&#8217;s in the deal. So they have scrapped the 25% tariff on steel and aluminium. The detail is hazy here and it&#8217;s unclear whether it applies to steel derivative products, etc. There&#8217;s still a lot to be worked out, but it&#8217;s promising. They&#8217;ve cut the 25% tariffs on car and car parts announced on Liberation Day to 10% for a maximum of 100,000 UK cars, which is roughly the amount they exported last year. And it tends to be the luxury high-end Jaguar, Land Rover, that sort of thing. And cars are the UK&#8217;s biggest export to the US. So this movement was really needed. Additionally, when it comes to aerospace, Rolls-Royce engine and plane parts will be tariff free. There&#8217;s no change to UK food standards on imports. And if you only knew the torrid discussion that&#8217;s been taking place in the UK press on chlorinated chicken, you would appreciate that that is a win also. On pharmaceuticals, the devil is again in the detail, but we&#8217;re told it&#8217;s going to be worked out. Pharma is the UK&#8217;s second biggest export to the US at around $6.5 billion. And for the US, it&#8217;s the fourth biggest export market. So it was a really important deal on both sides. They&#8217;ve said they didn&#8217;t want to disrupt the supply chain. So we are going to have to wait and see what they&#8217;ve decided on that. And then finally, there&#8217;s no change to the UK&#8217;s digital services tax on US tech companies. This brings roughly half a billion dollars to the UK treasury. And I think it was significant and something to watch out for in terms of really how successful the deal was. Lord Mandelson, the UK ambassador to the US said, what was suggested to us wasn&#8217;t acceptable to us, so it wasn&#8217;t in the deal. Does this mean it won&#8217;t be any future deals that will be worth watching and seeing, especially as we know how polished big tech lobbying efforts are? So I think in summary, it&#8217;s possibly the start of a beautiful friendship. It&#8217;s encouraging, especially for auto workers. But the idea that the political and economic obstacles that prevented a more comprehensive deal today will sort of somehow disappear over the coming years is vanishingly small.
Lisa Raitt: Yeah, here in Canada, as you know, Amber, we don&#8217;t really believe that a deal is done with Mr. Trump until a deal is done. And I guess it&#8217;s because there&#8217;s always moving on the target of which tariff is in place at which time and whether or not we&#8217;re in a time of reprieve. Do you think that the UK can take can take this deal to the bank?
Amber Batool: Such a good question. They do believe that Lord Mandelson has some really unique networks and connections with the US administration. So I think they really do hope it will. As you say, when you negotiate a deal with President Trump and you sign it, even then it doesn&#8217;t always stand. So I think it will be one to watch and see, but certainly the optimism is there in the UK side.
Lisa Raitt: Okay, and following along, does this serve as a template, do you think, for future trade deals with other countries like Canada that&#8217;s waiting in line?
Amber Batool: Well, to paraphrase Tolstoy, all unhappy economies are unhappy in their own way. And so for future trade deals, I think there&#8217;s something of a playbook in place. The UK had a very well executed diplomatic strategy supported by a peerless UK diplomatic machine. You had the carrot of a state visit to the UK in the autumn, the ability to move quickly. But then the US did press on the UK&#8217;s weaknesses. You know, we&#8217;ve been desperate for a deal since Brexit. Prime MinisterStarmer is trying to assert his place back on the world stage with some success when it comes to Ukraine. And he&#8217;s trying to revive flagging economic growth. So if you are waiting in the wings, which we believe Canada, India, Japan, South Korea are, you can be in no doubt that the US administration will press on your country&#8217;s specific weaknesses. You know, with Japan, the tariffs on metals and autos are said to cost something of 1% of their economic growth. The US will know this when they begin to negotiate. Or if you&#8217;re Vietnam and you&#8217;re running the third largest trade surplus with the US, you get really no bright ideas from how things are going with the UK. So there isn&#8217;t a one-sized-fit-all, but perhaps for Canada, there&#8217;s a hope at some point tariff fatigue sets in and Team USA wear themselves out.
Lisa Raitt: And just because I have you and it&#8217;s a bit timely right now, Prime Minister Starmer moved on from trade negotiations and trade policy into immigration policy, which is still economic policy. Maybe you can help us understand his announcements that have taken place in the last couple of days because they seem to have stirred up a lot of press along the way.
Amber Batool: Absolutely. So he has a lot on his plate at the moment. And so while he&#8217;s doing fairly well on the international stage, he&#8217;s having a much needed reset of their relationship with the EU. Absolutely fantastic press with this US trade agreement. He&#8217;s hosting an EU summit next week in the UK. On the domestic front, he&#8217;s having a much tougher time. So we recently had local elections in England, typically not a huge deal, but these ones were because the Reform Party made really big gains and cemented their status as a bit of a punchy challenger to the UK&#8217;s two main political parties. And for those who don&#8217;t remember or didn&#8217;t know, Reform originally started as somewhat of a one-party platform. It was all about a no-deal Brexit, a complete divorce from the EU. But their leader, Nigel Farage, has seen quite an astonishing revival in fortunes. In one recent poll, 37% of Brits thought Reform was a possible main opposition party surpassing the Conservatives, and 39% thought it was likely that Nigel Farage would become the Prime Minister. You and I often talk about how the rules of political gravity have gone out of the window in recent years, and this is a great illustration of that. The underlying issues that Farage has been running on has been festering, I would say, for decades. And chief among those is immigration. Rather ironically, migration really peaked post-Brexit because of the system the conservative government had put in place. So perhaps as a reaction to that, but perhaps as part of his broader reset with the EU, Keir Starmer announced a package of immigration reforms with the toughest language I think I&#8217;ve seen from his party for some time. He said it was a squalid chapter and a failed experiment in open borders. So while some of his reforms are kind of instinctively common sense, tougher language requirements, tighter access to visas, other parts like banning the recruitment of care workers from overseas seems really less compelling. And it&#8217;s caused a firestorm in his party. And it&#8217;s also ignited the discussion on immigration and Britishness. And I&#8217;m not sure once you start that conversation, you can control how it finishes. And so in some ways, he&#8217;s really on political quicksand.
Lisa Raitt: Well, lots to watch there for sure. Before I let you go, one last thing. I&#8217;m wondering if there&#8217;s anything we could be looking towards in the future, another marker, something else that may be an interesting waypoint for this government.
Amber Batool: I think watching how his relationship with the EU develops, I think whether he is able to remain at the heart of this peace deal for Ukraine and whether he is able to get some of hisunpopular welfare and benefit cuts through, despite all the big fanfare that we saw take place with this announcement. The governor of the Bank of England said when he saw it that, business says to me that we&#8217;re delaying investments because they&#8217;re just too uncertain about what the world is going to look like. And the UK outlook is conditional not only in the UK&#8217;s trade deal, but what the rest of the world agrees to as well. And I think that&#8217;s something to watch for both here at home in Canada and in the UK.
Lisa Raitt: I think that makes absolute sense. Thanks so much for joining us again, Amber. And I&#8217;m sure we&#8217;ll be talking once again as more unfolds, especially with the G7 coming up.
Amber Batool: Thank you very much for having me.
Lisa Raitt: Thanks so much for tuning in. Now, if you have any questions or comments or even requests on topics to discuss, drop me a line at lisa.raitt@cibc.com. Your interactions actually will make this better. I&#8217;m your host, Lisa Raitt, and this has been The Raitt Stuff.
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Concepts of a plan: What’s the deal with the new UK-US trade announcement?

Lisa Raitt

Vice-Chair, Global Investment Banking

CIBC Capital Markets

Amber Batool

Executive Director, Investment Banking

CIBC Capital Markets

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