3 days Ago
The agreement allows UK car companies to sell up to 100,000 vehicles a year into the US based on a reduced 10% tariff rate, down from the 27.5% the sector was subject to under previous deals. That gives them an advantage in the world’s biggest consumer market.
The aerospace industry will only benefit as the UK’s aerospace exports will be slapped with a zero tariff. These changes, signed at the G7 summit early this month, constitute a partial repeal of the punitive tariffs imposed by United States President Donald Trump in April which had rattled international markets.
UK Prime Minister Sir Keir Starmer welcomed the deal as "historic" and one that could safeguard key UK sectors. Business and Trade Secretary Jonathan Reynolds said the new tariffs will save essential industries “hundreds of millions every year" and safeguard “thousands of jobs".
Still Heavy Tariffs on Steel and Aluminium
While autos and aerospace are moving forward, steel and aluminum tariffs remain unresolved. These now face a 25% US tariff and this could rise to 50% if no deal is agreed by the key deadline of 9 July. Mr. Trump, in a recent interview, suggested that he was disinclined to extend this deadline, but he did not close the door to doing so. “I won’t have to,” he said, but he added, “I could, not a big deal.”
If sustained, the raised tariff could be highly damaging for UK metal exporters. Britain is in the active hunt for an alternative deal that could stave off these harsher demands.
In a concession, the UK will abolish a 20% tariff on US beef and will increase the quota to 13,000 tonnes. The UK will now also permit up to 1.4bn liters of US ethanol to enter without a tariff in place (the previous 19%). The decision has alarmed British bioethanol producers who have warned that it could disadvantage them at home.
Global Trading Body Changes and Deadlines Head into the New Year
The UK-US announcement is expected to be followed by a string of other domestic deals as other countries scramble to strike similar deals before the US deadline.
The two countries have one of the world’s largest trade relationships, exchanging over $900 billion (about £656 billion) in goods and services in 2024.
While some of those negotiations are at an impasse — Trump recently broke off talks with Canada over its digital services tax — Canada has since said it would roll back the tax and return to the table. Thailand is also seeking trade deals with the US, hoping to lower the duty on Thai products from 36% to 10 percent.
Whilst the UK certainly makes an important trade gain with this deal, the uncertainty over steel and aluminum tariffs is one of the key issues at stake with potentially significant outcomes to be settled depending on whether or not we strike a deal before 9 July.
