President Trump announced a trade agreement with the U.K. on Thursday, the first country-specific deal since the April 2 “Liberation Day” import taxes that raised the overall U.S. tariff rate to the highest level in more than a century.
The U.K. deal is meant to be the first of many for Trump, and comes as Treasury Department Secretary Scott Bessent heads to Switzerland for high-stakes trade talks with China. Top trading partners the U.S. and China have imposed triple-digit tariffs on each other as rapidly diminishing trade volumes and potentially higher prices loom on the horizon.
Here’s a look at what’s in — and not in — the U.S.-U.K. trade deal, and what it means for Trump’s reset of global trade relations.
Trump boosts British car industry with looser auto, dropped steel tariffs
The U.K. is allowed to export 100,000 cars to the U.S. at a 10-percent tariff rate, as opposed to the 25-percent rate announced March 26, marking a win for the British car industry.
The U.S. will also redesignate the auto tariffs for the U.K away from Section 232 tariffs, which are a national security tariff.
The British auto industry responded positively to news of the deal.
“The agreement announced today to reduce tariffs on UK car exports into the US is great news for the industry and consumers,” Mike Hawes, chief executive of British industry group SMMT, said in a statement.
He described the tariffs as “a severe and immediate threat to UK automotive exporters” and said the Thursday deal would provide “much needed relief.”
The deal also creates a new “trading union” for steel and aluminum components, which will also be moved away from Section 232 tariffs.
Trump’s metals tariffs were a headache for the British producers, delivering “a shock to the global economy,” according to the British Council for Aluminum in Building.
The president said he was inclined to ease tariffs on British autos and steel given the relatively small percentage of U.S. auto imports that come from the U.K. — many of which are of iconic luxury brands.
“We took it from 25 to 10 on Rolls-Royce, because Rolls-Royce is not going to be built here. I wouldn’t even ask them to do that,” Trump said. “It’s a very special car, and it’s a very limited number, too. It’s not one of the monster car companies that makes millions of cars. They make a very small number of cars that are superluxury, and that includes Bentley and Jaguar.”
Major questions about pharma tariffs, digital service taxes left unaddressed
The deal creates what the administration called “a secure supply chain for pharmaceutical products,” but did not specify what that entails.
U.K. Prime Minister Keir Starmer described the agreement as “hugely important” for the U.K. pharmaceutical companies ahead of Trump’s likely imposition of import taxes on foreign drugs.
“Obviously we don’t have tariffs yet [on pharmaceutical products], but we’ve got within the deal significantly preferential treatment whatever happens in the future,” he said, according to the Financial Times. “So this is hugely important for our pharmaceutical sector as well.”
The issue of digital services taxes, which are taxes on U.S. tech giants operating in foreign countries and a major international tax issue, are also not a part of the trade deal.
The British government told news agency Reuters that “the Digital Services Tax remains unchanged as part of today’s deal.”
“Instead, the two nations have agreed to work on a digital trade deal that will strip back paperwork for British firms trying to export to the US,” they said.
Trump sets up challenge to UK food rules with beef imports
Thursday’s agreement opened up the U.K. market for ethanol as well as beef produced in the U.S. without hormones, while allowing the U.K. to sell some beef in the American market.
The White House said the deal will create $5 billion in new market access for American farmers, including “$700 million in ethanol exports and $250 million in other agricultural products, like beef.”
Economists took note of U.K. market access for beef and what it means for U.S. ranchers, who will have to produce it to British specifications.
“The market opening for U.S. beef that meets U.K. standards … is the most interesting concession, as historically U.S. big [agriculture] has insisted that any trade deal force American trading partners to accept U.S. standards,” Council on Foreign Relations senior fellow Brad Setser observed.
He added that “if the U.S. wants to make its exports great again, it needs to be willing to produce to some foreign standards [and] tastes.”
Deal was in the works long before ‘Liberation Day’
U.S. officials acknowledged the deal was not a direct result of the country-specific “Liberation Day” tariffs that sent shockwaves through the world of international trade and even surprised the Federal Reserve.
“We’ve been trying for years, and they’ve been trying for years to make a deal, including when I was in the first term,” Trump said.
Progress toward a U.S.-U.K. stalled out during the first Trump administration due in part to concerns from former Speaker Nancy Pelosi (D-Calif.) about the treatment of the border between the U.K. and Ireland.
The U.K. ranks 11th in total trade volumes with the United States. Trade experts describe the agreement as modest and much smaller in scope than traditional free trade agreements.
“This is a very small deal,” Setser said.
Trump’s 10-percent general tariff remains in place for the U.K., as do most of the limits on U.S. exports to the U.K.
An easier deal for Trump to strike due to a trade surplus
The U.K. is one of the few countries in the list of top U.S. trading partners with which the U.S. maintains a trade surplus, as opposed to a deficit. Only 2-3 percent of U.S. goods imports come from the U.K.
Experts see the deal as significant for its political messaging as much as its commercial effects.
“The importance of today’s announcement will be more about what it signals about the administration’s willingness to take down tariff rates on other countries substantially and quickly – because doing so remains the only clear path at this point to avoiding a recession,” Daniel Hornung, deputy director of the National Economic Council during the Biden administration, said in a commentary.
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