Analysis: What is in the US-UK trade deal and what does it mean?
The US administration has offered the UK its first trade deal since President Trump turned global trade on its head last month.
The UK government will see the deal as a win, at least symbolically, while Bank of England Governor Andrew Bailey hailed news of a trade deal as “excellent”.
Chancellor Rachel Reeves said reducing trade barriers would be “good for living standards” and for jobs across Britain.
But the impromptu event raised some questions over what was agreed, why it was agreed and what prompted this deal.
What has led up to this trade deal?
The UK has been eager to secure new trade deals ever since Brexit more than five years ago, with hopes that the trans-Atlantic “special relationship” could be deepened.
But President Trump’s so-called ‘Liberation Day’ in April ushered in a new era for global trade as extra barriers were put up.
The US president announced “baseline” tariffs of ten per cent on the UK, along with higher tariffs on countries and territories ranging from China to the Marshall Islands.
It added 25 per cent US tariffs on all imports of steel, aluminium and vehicles.
Markets across Asia, Europe and North America tumbled while US treasury yields surged, piling pressure on Trump to ease tariffs.
Trump responded by offering all countries except China, Mexico and Canada a 90-day reprieve.
Treasury secretary Scott Bessent has raised hopes of a deal being struck with a major trading partner in recent weeks.
A UK-US trade deal was on the cards during Trump’s first administration between 2016 and 2020 when successive Conservative governments were negotiating the terms of an exit from the European Union.
When Prime Minister Keir Starmer visited the US in late February, President Trump talked up the prospect of a free trade deal being agreed between the two allied countries.
What’s in the trade deal?
Details around the deal remain scant but Keir Starmer has said that tariffs on steel and aluminium will be slashed to zero, having been set at 25 per cent earlier this year.
Tariffs on cars will be slashed to ten per cent for a quota of 100,000 vehicles.
The Society of Motor Manufacturers and Traders (SMMT) said that UK car makers exported 101,000 units to the US last year, suggesting that the deal may not offer car manufacturing room to grow tariff-free.
Mike Hawes, SMMT chief executive, said the deal provided some “relief” to leading car makers such as Jaguar Land Rover, whose factory in the West Midlands was chosen as the location for Starmer’s press conference.
It was also suggested that closer security arrangements have been agreed.
Both President Trump and Keir Starmer said the deal would help the economies “open up” to each other, with the US president claiming American cattle farmers would win after a tariff free quota for 13,000 metric tonnes of beef was brought in.
“Perhaps most controversially, the UK has promised to open up its markets to US agricultural products, including beef,” Lindsay James, investment strategist at Quilter, said.
“Downing Street is keen to stress there will be no lowering of standards, but it does perhaps suggest the government was somewhat eager to strike a deal and may as a result have crossed some previous red lines.”
A 90-day reprieve on “baseline” ten per cent tariffs on all imports from the UK – and several other major economies – has remained in place.
UK ambassador to the US Peter Mandelson said the deal represented the “end of the beginning”.
Will the UK economy grow at a faster pace?
Leading forecasters have suggested that the knock to UK GDP expected from tariffs could be lower with a trade deal coming into effect.
But the Bank of England said on Thursday that Trump’s trade war with China would knock UK GDP back by around 0.3 per cent.
It was unable to make an estimate for what a UK-US trade deal would mean for UK growth.
The National Institute of Economic and Social Research earlier this week predicted the UK was set to suffer a GDP knock of at least 0.1 per cent from Trump’s tariffs.
British Chambers of Commerce director general Shevaun Haviland said the deal would be a “huge sigh of relief” for businesses across the country.
“We must continue to push the argument for free and fair trade across all economic sectors and that tariffs are a lose-lose position,” Haviland said.
“The commitment to pursue a digital trade deal and make commerce easier in the future is also a worthy ambition.
Bilateral trade between the two countries is worth more than £300bn when services are taken into the account, which is one of a number of sectors that were not included in tariffs.
Michael Pearce, deputy chief Economist at Oxford Economics, said he was “not minded” to change forecasts based on the deal.
Will the UK secure another trade deal?
The UK struck a comprehensive trade deal with India earlier this week.
Economists are already looking ahead to a UK-EU summit later this month as crucial to reviving the British economy.
“For all the excitement about trade deals with India and the US, it’s talks with the EU that will be most pivotal for the UK,” ING economist James Smith said.
“This is not simply about reducing reliance on the US. All of these negotiations, particularly those with the EU, are designed above all to ease the pressure on Britain’s public finances.”
It appears that the UK may have offered the EU some concessions by agreeing to bring back a youth mobility scheme.