US President Trump announced a trade agreement that will occur between the United States and the United Kingdom, which marks the first trade deal since the launch of Trump’s sweeping tariffs in April, also known as “Liberation Day”.
The deal aims to improve the access for American exports while maintaining a 10% baseline tariff on UK imports.
Reason Behind the Trade Agreement
Trump imposed a 10% baseline tariff on the UK in early April, as part of a rollout of what he claimed were “reciprocal” import duties on nearly every country on earth. ⁽¹⁾
The UK is also affected by separate US tariffs on imports of steel, aluminum and foreign-made cars. ⁽²⁾
Trump quickly backed off the reciprocal plan amid a market rout and mounting criticism. He announced a 90-day pause that set an across-the-board 10% tariff rate for all affected nations except China.
The US has a trade balance surplus with the UK, which led to negotiations compared to other countries where the US faces trade deficits. ⁽³⁾
Trade Agreement Factors
The US-UK trade deal includes several factors designed to support the balance between US and UK goods: ⁽⁴⁾
- A 10% US tariff on UK imports will be kept in place
- Adjustable tariffs on UK autos, so that the first 100,000 vehicles imported from UK car manufacturers each year are subject to a 10% rate, and any additional vehicles face 25% rates.
- The deal creates a $5 billion opportunity for US farmers and producers, including ethanol exports that could reach more than $700 million and $250 million in American beef and other agricultural products.
- Commitment from both countries to continue working together to enhance industrial and agricultural market access.
- The agreement secures supply chains for US aerospace and pharmaceutical industries through access to UK markets and products.
- Commitments include stronger intellectual property protections, streamlined customs procedures, and labor and environmental standards.
- The US will negotiate an alternative to Section 232 tariffs on UK steel and aluminum, potentially forming a “new trading union” for these materials.
While president Trump and UK Prime Minister Keir Starmer stated that the deal was a milestone, many details are still being finalized, with a final agreement expected to be signed soon.
Global Trade Implications
The US-UK deal occurs during escalating global trade tensions. The European Union has prepared a list of US products to target with retaliatory tariffs if trade talks falter. ⁽⁵⁾
Meanwhile, China and the US agreed to suspend most tariffs on each other’s goods in a move that shows a thawing of trade tensions between the world’s two largest economies. The U.S. will cut tariffs on Chinese goods to 30%, and China will lower its levies to 10% for 90 days. ⁽⁶⁾
Trump’s tariffs have not yet had a full economic impact, according to Federal Reserve Chair Jerome Powell, the extent of the disruption will depend on how quickly and successfully trade talks proceed. ⁽⁷⁾
Trump’s meeting with Canadian Prime Minister Mark Carney further indicates his strategy of pressuring trading partners to initiate offers, placing the burden on other nations to propose terms. ⁽⁸⁾
