US and UK leaders welcomed the trade deal signed between the two sides as “historic” on Thursday, but experts warned that the UK faces higher tariffs on the US than before Donald Trump took office.
The 10% global tariff imposed by Trump in April remains, but the UK has earned major concessions in steel and auto tariffs, which saw Trump increase by another 25% in February and March.
In return, the UK has granted greater access to beef, ethanol and industrial products to the US, raising concerns that the UK market is at risk of overwhelmed by US products.
UK negotiators have avoided straying into politically controversial areas, such as reducing the UK’s digital services tax, opening up the healthcare market to American businesses, and changing UK food standards rules, allowing products such as chlorine-washed chicken and hormone-treated beef.
Mattia di Ubardo, a lead researcher in international trade at the University of Sussex, said the transaction caused the UK to “a significant worse position” on bilateral trade terms with the US than it was a year ago, but now has a competitive advantage over several other countries.
economy
The economist said the transaction will provide industry relief at the greatest risk from tariffs, but said it would not be different to the overall economic outlook for the US or the UK. They suggested that the US would struggle to make meaningful deals with other countries.
Limited relief from tariffs on automobiles and steel and aluminum would “escape” at effective tariff rates in the US, but the average tariffs remained in double digits and were still set to hit American consumers hard, said consultant Michael Pierce of Oxford Economics.
“I don’t think this will have a significant impact on the UK’s overall GDP,” said Peder Beck-Friis, Pimco economist. “Ongoing fiscal tightening and (Bank of England) policy remain a more important driver of the outlook.”
Paul Dales, UK economist at Capital Economics, said effective US import duties in the UK would be around 11%, as a result of a much higher arrangement than the 1% that existed last year. This was an improvement of 13% ahead of Thursday’s agreement, but it relied heavily on future US measures on key sectors such as drugs.
Auto
British automotive executives have greatly welcomed the deal. This reduced the potential tariff of 27.5% to 10% on the first 100,000 cars shipped from the UK.
According to the Automobile Manufacturers and Traders Association, the new quota accounts for almost all of the 101,870 vehicles exported to the US last year.
“The application of these tariffs was a serious and immediate threat to UK car exporters, so this transaction provides much needed relief,” said Mike Hawes, CEO of SMMT.
Adrian Mardel, chief executive of Jaguar Land Rover, the largest exporter of cars to the United States, described the deal as “a critical progress” that provides the “certainty needed to continue investing in the future.”
However, he warned that “this is not UK work,” in hopes that future negotiations will eventually reduce tariffs.
“It’s not without challenges, but it’s manageable,” another executive said.
The UK’s automotive industry relies heavily on European exports, but automobiles are the largest single export item to the US, accounting for sales worth £6.4 billion. It is also the largest market for high-end brands, including JLR’s Range Rover, and Bentley and McLaren, which do not have a manufacturing footprint in the US.
Aerospace
The UK also secured a transaction that allowed Rolls-Royce to export engines to US “no tariffs,” but said management still hopes that all aerospace components will be exempted.
Rolls-Royce shares rose 3.6% after news. Meanwhile, shares in US plane maker Boeing rose 2.8% on Thursday after U.S. Commerce Secretary Howard Lutnick said that British airlines were planning to buy company planes worth $10 billion. British Airway owner IAG was locked up in a contract to buy a Boeing 787 aircraft Thursday night.
A large user of steel and aluminum, the aerospace industry is rushing to adapt to Trump’s trade war, already reducing higher costs through its integrated supply chain.
“While tariffs of 10% will be maintained, eliminating additional tariffs on steel and aluminum is a key achievement,” said Kevin Craven, CEO of ADS, an aerospace and defense trade organization.
“The elimination of reported engine and aerospace parts tariffs is also very welcome, but we are waiting for more specific details,” he added.
Agriculture and food
Farmers welcomed the UK government’s commitment to maintain UK food standards and ensuring mutual access to the beef trade, but warned that ethanol flooding into the UK could be hit by farmers.
The White House said the deal would “significantly expand” U.S. market access in the UK, citing a $700 million opportunity for ethanol exports and a $250 million opportunity for other agricultural products such as beef.
“Our biggest concern is that two agricultural sectors have been chosen to take on the heavy burden of removing tariffs on other industries in the economy,” said Tom Bradshaw, chairman of the British National Federation of Farmers.
The NFU said biofuels are “very important” for the UK’s cultivated crop sector. “Fully liberalizing the ethanol market could lead to losses for this profitable outlet for cultivable growers,” he said. UK bioethanol is produced primarily from household wheat and imported corn.
Downing Street said the UK and the US have agreed to access the “mutual” market in beef, with British farmers receiving a 13,000 metre tariff quota.
The White House said the UK has maintained tariffs of up to and above 125% and above 125% in addition to maintaining “unjust” and “non-science-based standards that have a negative impact on US exports.
Before Trump imposed a 10% tariff on blankets, the US applied an average agricultural tariff of 5% on UK imports, with the average UK tariff being 9.2%.
The Food and Drink Federation, an industry lobby for food manufacturers, says the 10% tariff will still affect UK food exporters. The industry sent £2.7 billion worth of goods to the United States in 2024.
steel
A few weeks after the UK government stepped in to save the UK’s last remaining steel furnace, the industry welcomed a contract to scrap tariffs on US exports as “very important.”
In February, weeks after taking office, Trump tore a deal between the UK and the US, attacking under former President Joe Biden, slamming 25% tariffs on all British steel and aluminum imports.
The UK Steel, a trade group, stressed that some clarification of the terms of the contract remains necessary. It was particularly emphasized whether the strings would be attached to steel to qualify for a zero percent tax, and when changes to the rules took effect.
The US is the second largest market for steel exports from the UK, after Europe. In 2024, the UK exported 180,000 tons of semi-photoed steel to the US, with £370 million worth of its . This is 7% of the UK’s total steel exports, accounting for 9%.
Pharmaceuticals
The United States has agreed to provide UK priority treatment for tariffs imposed as part of Washington’s ongoing investigation into whether drug and semiconductor imports pose a threat to national security, the UK claims.
Priorities welcomed concessions as a step to protect the UK “what will happen in the future.” This is a reference to the fact that Trump is still considering whether to impose tariffs on drugs.
The transaction laid the foundation for a future UK-US technology partnership where the UK can work together in sectors such as biotechnology, life sciences, quantum computing, nuclear fusion, aerospace and space.
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The promise raised hopes that the worst impact of future Trump tariffs will be avoided in the drug industry, but the sector remains cautious without further details.
“It’s a good progress, but we need to understand a little more about it,” one industry figure said. “This all leads to a lack of clarity,” another said, but still pointed out “positive framing.”
Reported by Andy Bounds of Peter Foster, Kana Inagaki, Sylvia Pfeifer, Madeleine Speed, Michael Peel, Gillian Plimmer, Sam Fleming, Delphine Strauss, Philip Georgiadis, and Brussels
