The UK and US have finalized an agreement addressing tariffs on select goods traded bilaterally.
President Trump’s previously implemented 10% tariffs on global imports remain largely in effect for UK goods entering the US market.
However, this new deal reduces or eliminates tariffs on specific UK exports, including automobiles, steel, and aluminum.
A summary of the agreement’s key provisions is outlined below.
Contrary to President Trump’s social media pronouncements of a “major trade deal,” this agreement is a more limited accord.
The president lacks the authority to unilaterally enact the type of comprehensive free trade agreement recently concluded between India and the UK; such agreements require Congressional approval.
Congressional ratification of a broader trade deal would necessitate a longer timeframe than the 90-day tariff suspension currently in place.
This agreement specifically reverses or reduces certain tariffs on targeted goods.
It represents a preliminary, narrowly focused agreement; substantial negotiations and legal documentation will follow in the coming months.
Trump’s prior 25% import tax on automobiles and auto parts, in addition to the existing 2.5%, has been adjusted.
The tariff is reduced to 10% for a maximum of 100,000 UK vehicles, aligning with the UK’s car export volume in the preceding year.
Exports exceeding this quota will be subject to a 27.5% import tax.
Automobiles represent the UK’s largest export to the US, valued at approximately £9 billion last year.
Jaguar Land Rover, exporting nearly 25% of its vehicles to the US, described the deal as providing “greater certainty for our sector”.
However, automotive industry leaders have expressed concerns to the BBC that the quota might effectively limit their competitive export capacity.
The UK currently imposes a 10% levy on US car imports; any changes to this remain unclear.
The US previously demanded a reduction to 2.5%, and Chancellor Rachel Reeves indicated openness to such a reduction.
Trump also announced tariff-free export access for Rolls-Royce engines and aircraft components from the UK to the US.
A 25% tariff on steel and aluminum imports into the US, effective March, has been eliminated.
This development is positive for companies like British Steel, previously under government control due to operational challenges.
Nevertheless, the White House announced a quota system for “most favoured nation rates for UK steel and aluminum and certain derivative steel and aluminum products.”
The volume of these products the UK can export under this quota system without increased tariffs remains uncertain.
It’s also unclear whether tariff removal applies to steel derivatives and whether the benefit extends only to steel melted and poured within the UK.
UK steel and aluminum exports to the US are comparatively modest, totaling approximately £700 million.
However, tariffs also encompass products incorporating steel and aluminum, including gym equipment, furniture, and machinery.
These products represent a significantly larger value, approximately £2.2 billion, or about 5% of total UK exports to the US last year.
Steel UK, an industry body, noted that “several hurdles must be overcome before the UK steel sector can realize the benefits of this agreement”.
The organization highlighted the need for clarity on supply chain requirements, quota details, and implementation timelines.
Details regarding pharmaceuticals remain pending, with ongoing discussions between the UK and US on this and other reciprocal tariffs.
The US stated both nations would “promptly negotiate significantly preferential treatment outcomes on pharmaceuticals”.
Pharmaceuticals constitute a major UK export to the US, reaching £6.6 billion last year, making it the second-largest export category.
Conversely, it’s the fourth-largest US export to the UK, valued at £4 billion last year.
Most countries, including the US, generally impose minimal or no tariffs on finished pharmaceuticals under agreements aimed at maintaining affordability.
The president has yet to announce any trade restrictions on medicines.
The UK’s 2% digital services tax remains unchanged, appearing as a point of contention in the agreement.
Social media, search engine, and online marketplace operators are subject to this tax if their global revenues exceed £500 million and UK user revenue surpasses £25 million annually.
US tech giants like Meta, Google, and Apple readily meet these thresholds.
The UK reportedly collected nearly £360 million from US tech companies through this tax in its initial year.
The UK government stated its commitment to collaborating on a digital trade agreement.
Conversely, the US government expressed disappointment in the UK’s unwillingness to fully address the tax.
“It is discriminatory, unjustified, and should be removed promptly,” the US government stated.
US beef exports to the UK, previously subject to a 20% tariff within a 1,000 metric ton quota, now face no tariff with a raised quota of 13,000 metric tons, according to the White House.
In return, the UK secured a similar quota at a reduced rate, consistent with other nations.
Importantly, the UK government emphasized that this deal does not compromise UK food safety standards, reiterating that hormone-treated American beef will not enter the UK market.
Many American farmers utilize growth hormones in beef production, a practice banned in the UK and EU since the 1980s.
The US has previously advocated for relaxed regulations on its agricultural products, including hormone-treated beef.
In this instance, the UK prioritized alignment with EU standards – and the upcoming “Brexit reset” with the EU – over US interests.
The tariff on ethanol imports from the US to the UK has also been removed.
The National Farmers Union expressed concern regarding the deal’s inclusion of “a significant volume of bioethanol [a renewable fuel made from crops],” citing potential negative impacts on British arable farmers.
The UK government stated there was “no such thing as a veto on Chinese investment” within its tariff agreement with the US.
Official figures indicate a decline in payroll employment during the first quarter of the year.
During a major diplomatic visit to Saudi Arabia, Qatar, and the UAE, the president aims to secure substantial new US investments.
Chinese online retailers previously utilized the “de minimis” exemption to ship low-value goods to the US.
The government maintains that hormone-fed beef will not enter the UK, although farmers still have unresolved questions.