The United States and United Kingdom have reached a breakthrough trade agreement that will slash U.S. tariffs on British steel, aluminium, and automobiles, while opening the UK to increased American agricultural and industrial exports. Announced jointly by President Donald Trump and UK Prime Minister Keir Starmer on the 80th anniversary of Victory in Europe Day, the deal marks the first bilateral accord struck by the U.S. since Trump imposed sweeping 10% tariffs on nearly all trading partners in April.
Described by Trump as a “full and comprehensive” agreement, the deal is framed as a redefinition of the special relationship between the two nations, while remaining notably limited in legal scope. No formal treaty has been signed, and U.S. officials indicated that final details are still being written.
Key tariff changes
- Steel and aluminium: U.S. tariffs on UK steel and aluminium—previously set at 25%—will be eliminated entirely. This is expected to significantly benefit UK producers like British Steel, which has faced operational uncertainty due to earlier tariffs.
- Automobiles: For UK car exports, the 25% import duty will be reduced to 10% on the first 100,000 vehicles shipped annually to the U.S.—roughly in line with last year’s volumes. Exports above that threshold will continue to face a 27.5% tariff. The UK currently levies a 10% duty on U.S. cars, which may also be reduced to 2.5% pending further talks.
- Agriculture and ethanol: The UK will eliminate tariffs on U.S. ethanol and increase market access for American beef and other agricultural goods. British farmers, in turn, will be granted a 13,000-tonne tariff-free beef export quota to the U.S. Both governments affirmed that UK food safety standards would remain intact.
- Aerospace and procurement: U.S. aerospace firms will gain preferential access to UK components, while Rolls-Royce engines and aircraft parts will be eligible for tariff-free entry into the U.S. The deal also opens UK procurement markets to greater U.S. competition.
Broader framework, unresolved sectors
The White House fact sheet emphasised commitments to cooperation on intellectual property, labor, environment, and pharmaceuticals, although detailed provisions—especially on drug trade—remain under negotiation. The agreement establishes a framework for further talks rather than a full free trade deal, which would require Congressional approval.
Notably absent was any resolution on the UK’s 2% digital services tax, which targets large U.S. tech firms like Meta and Google. The UK maintains the tax but pledged to work toward a “digital trade deal” that would simplify cross-border digital commerce.
Strategic and political implications
The timing of the announcement—tied symbolically to the WWII alliance—was not lost on either leader. “This is a really fantastic, historic day,” Starmer said during a remote joint address with Trump. “It’s going to boost trade between and across our countries. It’s going to not only protect jobs, but create jobs.”
Trump described the UK as a fair-dealing ally: “They always treated us with great respect,” he said, contrasting the UK favorably to other trade partners facing higher prospective tariffs. He added that the 10% baseline tariff remains a “floor” in future negotiations, with some countries likely to face significantly higher rates.
Markets and next steps
Markets reacted positively to the announcement. By midday Thursday in New York, the S&P 500 was up nearly 1%, with investors hopeful that this agreement could mark the beginning of broader tariff rollbacks. However, many analysts remained cautious, noting that the deal is narrow in scope and unlikely to be easily replicated with countries like China or the EU.
While the U.S. runs a trade surplus in goods with the UK—$11.9 billion in 2024—the UK is more reliant on the American market. The U.S. was Britain’s largest trading partner last year, though most of that trade was in services, not goods.
Negotiations began under the Trump administration in 2020, stalled during the Biden years, and were revived after Trump returned to office in January. Talks have accelerated in recent weeks, culminating in Thursday’s announcement.
Starmer, who is also pursuing trade deals with India and reengagement with the EU, called this agreement “just the start.”
