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US and UK Strike New Trade Deal: What You Need to Know

5/8/2025
The US and UK have reached a new trade agreement that reduces tariffs on British cars and allows tariff-free imports of some steel and aluminium, but key challenges remain.
US and UK Strike New Trade Deal: What You Need to Know
Discover the details of the new US-UK trade deal that promises to cut tariffs but leaves much to be desired. Will it really benefit UK industries?

The United States has reached a significant agreement with the United Kingdom to reduce import taxes on select British cars and permit certain steel and aluminum imports to enter the country tariff-free. This announcement marks a crucial development for key UK industries that have been impacted by the new tariffs introduced by President Donald Trump since he took office in January.

Despite the positive reception from leaders in both countries, analysts have pointed out that this agreement does not fundamentally change the pre-existing trade terms between the US and UK, which were altered by Trump's earlier decisions. While no formal deal was signed on the day of the announcement, the details provided were somewhat sparse.

Details of the Trade Agreement

Speaking from a Jaguar Land Rover factory in the West Midlands, Sir Keir Starmer praised the agreement as a "fantastic platform" for future collaboration. Meanwhile, President Trump characterized the deal as a "great deal," countering criticisms that he was exaggerating its significance. "This is a maxed-out deal that we're going to make bigger," he stated, emphasizing the potential for future expansion.

Under the terms of the agreement, the US has committed to lowering the import tax on cars from 25% to 10% for up to 100,000 vehicles annually. This change is expected to benefit luxury car manufacturers like Jaguar Land Rover and Rolls Royce. However, industry experts caution that this limitation may restrict growth potential in the coming years, as it aligns closely with the volume of cars the UK exported last year.

Additionally, tariffs on steel and aluminum, which had previously been increased to 25%, have also been significantly reduced. The UK Prime Minister’s Office announced that both nations agreed on reciprocal access for beef exports, allowing a quota of 13,000 metric tonnes for UK farmers. While the White House did not confirm these numbers, it did indicate an expectation of increased beef and ethanol exports to the UK, which has long been a demand from the US.

Potential Economic Impact

The agreement is projected to create a $5 billion opportunity for US exports, including $700 million in ethanol and $250 million in other agricultural products. US Agriculture Secretary Brooke Rollins emphasized the importance of this deal, stating that it cannot be understated. On the other hand, Gareth Stace, Director General of UK Steel, welcomed the agreement, highlighting that the UK Government's strategic approach in negotiations with the US yielded significant relief for the steel sector.

However, some business groups voiced skepticism about the agreement's effectiveness. Duncan Edwards, chief executive of BritishAmerican Business, noted that while the current situation is an improvement, it still falls short of pre-existing conditions. He expressed difficulty in finding excitement about the announcement, indicating a cautious approach among business leaders.

Concerns and Future Negotiations

In the House of Commons, Conservative Shadow Trade Secretary Andrew Griffith referred to the announcement as a "Diet Coke deal," implying it lacks substance. Trade Minister Douglas Alexander emphasized that while the deal saves jobs, it is by no means a comprehensive solution.

Discussions regarding a broader trade deal between the US and UK have been ongoing since Trump's first term, with prior attempts to finalize a mini-agreement. The US has consistently advocated for changes that would benefit its farmers and address pharmaceutical issues, which have been politically challenging for the UK. The extent of progress on these matters remains unclear.

The National Cattlemen's Beef Association has indicated that the agreement represents a major victory for American ranchers. However, the US Meat Export Federation, which monitors trade barriers, is still working to clarify the specifics of the changes. The UK has assured that there will be no compromise on food standards for imports, but analysts caution that the actual impact of the agreements will depend on the finer details.

As the US has expressed intentions to tax imports of pharmaceuticals to strengthen its domestic manufacturing of critical medicines, the UK has stated that British firms will receive preferential treatment. Yet Ewan Townsend, a lawyer with expertise in healthcare law, noted that the industry is now left awaiting further clarification on what this preferential treatment will entail.

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