The United Kingdom and the United States are expected to unveil a new agreement aimed at easing tariffs. While the complete details are still to come, early indications suggest that while the US’s broad 10% tariffs on imports will likely remain in place, the UK may benefit from reductions on some of the 25% duties affecting key British exports.
Not a Full Trade Agreement
Despite US President Donald Trump referring to the upcoming announcement as a “major trade deal” on social media, this will not be a formal free trade agreement. Trump does not have the authority to sign off on such deals—that power rests with the US Congress.
A proper trade agreement would require Congressional approval, which is a lengthy process and cannot be completed during the 90-day freeze Trump has placed on certain tariffs. What’s expected instead is a limited arrangement involving specific exemptions or tariff reductions on select goods.
A Modest Start
The deal, set to be announced today, is likely to be a narrow and relatively modest agreement. Any wider-ranging negotiations and accompanying legal formalities will take months to conclude. This initial phase may only apply to a handful of goods and may be temporary in nature.
For now, most UK exports entering the US are still subject to a general 10% tariff. This deal is expected to reduce that rate only on certain high-impact items.
Focus on the Automotive Sector
One of the central areas of concern is the automobile industry. The US has already imposed a 25% levy on imported cars and car parts. As vehicles represent the UK’s largest export to the US—valued at around £9 billion last year—any tariff relief in this area would be significant.
The agreement could potentially involve a reduction of this 25% tax or the introduction of a quota system, allowing a limited number of UK-made vehicles to enter the US market either duty-free or at reduced rates. However, industry leaders have expressed a clear preference for lower tariffs across the board, warning that quotas could cap their competitiveness.
On the UK’s side, the current 10% tariff on US car imports might also be revised. The US has asked that this be reduced to 2.5%, and UK Chancellor Rachel Reeves has suggested she is open to that possibility.
Steel and Aluminium: High-Impact Sectors
In March, the US reintroduced a 25% tariff on steel and aluminium imports. While the UK’s direct exports in these materials are relatively modest—around £700 million—the impact extends further. The tariffs also apply to goods containing these metals, including fitness equipment, furniture, and industrial machinery, collectively worth more than £2.2 billion last year.
Leaders in the UK’s steel industry warn that without changes, the ongoing tariffs could inflict serious damage. Whether this new deal will involve a rate cut or adopt a quota-based model remains to be seen. There’s also the concern that US protectionism could reduce demand for foreign products, prompting global suppliers to flood other markets, including the UK’s, with excess stock—putting further strain on domestic producers.
Pharmaceuticals Remain Uncertain
It’s unclear what the deal will include regarding pharmaceuticals. Medicines are typically exempt from tariffs under international agreements to keep healthcare costs down. Pharmaceuticals are also a vital part of UK-US trade. Last year alone, British exports of medical products to the US totaled £6.6 billion, making it the UK’s second-largest export category to America.
Likewise, the US exported around £4 billion worth of pharmaceuticals to the UK in the same period. Though no new tariffs have been announced on medicines so far, any future change could significantly impact both markets.
A Possible Concession on Digital Services Tax
Another angle being closely watched is the UK’s digital services tax, which imposes a 2% charge on the UK revenue of tech giants operating online marketplaces, search engines, and social media platforms. This tax targets companies with over £500 million in global turnover and at least £25 million from UK users—criteria that encompass most major US tech firms.
The UK collected nearly £360 million from American companies through this levy in its first year. However, it’s speculated that the UK may consider scaling this back in exchange for tariff reductions on critical exports like cars and pharmaceuticals. Doing so could pose a political risk, appearing as a concession to both Big Tech and Trump.
Food Standards Off the Table
While there’s potential for reduced tariffs on US agricultural goods, the UK government has made it clear that domestic food safety standards are non-negotiable. This means controversial items like chlorinated chicken or hormone-treated beef will remain banned.
The UK has maintained regulatory alignment with the EU on food standards, and the upcoming “Brexit reset” is unlikely to shift this stance. American farming practices, particularly the use of growth hormones, have long been a sticking point in trade talks, with the UK and EU banning such products since the 1980s.
If the US agrees to a limited deal without pressing for concessions on food safety, it would be seen as a diplomatic win for the UK.
