On Thursday, the UK and the US concluded their own important trade deal. This is an important step towards the economic bilateral future that we hope to see between them. Tariffs are part of the deal. The U.S. maintains a 10% baseline tariff on nearly all goods that we import from the U.K. This unique setup highlights the opaque and complicated nature of trade negotiations and the continuing effects of tariffs.
The trade deal is further evidence of the U.K.’s extraordinary status. It is one of very few countries that the U.S. has a trade surplus in goods. This fortuitous development gave British officials crucial leverage to put their preferred pace and terms in negotiating with the Trump administration. Due to this agreement, the U.K. can now export at least 100,000 vehicles to the U.S. annually under the 2.5% tariff rate. Any new vehicles would be hit with a punitive 25% duty.
Besides winning protection of automotive exports, the U.K. managed to negotiate carve-outs for its automotive, as well as steel and aluminum industries. The U.S. had earlier slapped a 25% tariff on steel and aluminum imports. Under the new deal, this tariff will be removed entirely for UK exporters. Despite these concessions, all other goods imported from the U.K. to the U.S. will still face the 10% baseline tariff.
President Donald Trump repeatedly noted that this 10% tariff is the lowest country-specific tariff there is. He says it’s a very enticing deal for other trading partners. Political observers view Trump’s comments as a real threat. They think other countries should prepare for much worse tariffs, arguing that at least a 10% tariff will soon be the best offer on the table.
“This has been a key sticking point in recent trade discussions with Japan, given the importance of its auto sector,” said Abiel Reinhart, commenting on the broader implications of these tariff structures.
The recent agreement is the first trade deal finalized by the U.S. since President Trump announced reciprocal tariffs last month, which he implemented across various nations. Critics warn that the agreement further militarizes the U.K.-U.S. relationship. Contrary to popular belief, it does not increase trade flows between the two countries much at all.
Andrew Hood noted, “It is notable that the deal is far more restricted than most Free Trade Agreements.” He emphasized that exemptions are needed to lower the effective tariff rate. The baseline rate of 10% is nonetheless a floor that remains in place, yielding an average overall U.S. tariff that remains in double digits.
Michael Pearce expressed concern about the economic ramifications of such tariffs: “While exemptions will nibble away at the effective tariff rate the average US tariff is still set to remain in double digits, which will deliver a big hit to real incomes in the US which will cause growth to slow sharply in the second half of the year.”
Even though Britain has got a few exemptions rubber stamped, cloudy skies still await. One influential former trade minister went as far as to say that the U. This step will sharply deepen its trading ties with the U.S. This can-do but not-yet-done attitude particularly emphasizes that as far we’ve come, there’s still a long way to go.
Trump says that this deal will be the exception that proves the rule, not a precedent. His statement underscores the tenuous trade balance between the two countries. Given Britain’s close relationship with the U.S. historically speaking, they found the White House unwilling to budge on removing all tariffs. Negotiations failed in delivering on this promise.