Key Points On The U.S.-UK Finalized Trade Deal

The United States and the United Kingdom finalized a trade deal on June 16, 2025, announced by President Donald Trump and Prime Minister Keir Starmer during the G7 summit. This agreement, described as a “breakthrough” and “historic,” focuses on reducing tariffs and enhancing market access, particularly for specific sectors, while maintaining some tariffs and leaving details to be finalized.

US tariffs on UK steel and aluminum imports, previously set at 25%, have been scrapped entirely. Tariffs on UK car exports to the US reduced from 27.5% to 10% for a quota of 100,000 vehicles annually, covering nearly all UK car exports (104,000 in 2024). UK eliminates tariffs on US ethanol imports, benefiting American farmers with over $700 million in ethanol exports and $250 million in other agricultural products like beef.

Rolls-Royce engines and plane parts from the UK will be exported to the US tariff-free, while the UK agreed to purchase $10 billion worth of Boeing planes. The deal provides US companies with unprecedented access to UK markets, creating a $5 billion opportunity for US exporters, particularly in agriculture (beef, ethanol, fruits, vegetables, etc.) and aerospace.

Reciprocal market access for beef, with both countries granted quotas for 13,000 metric tonnes of beef exports. Streamlined customs procedures and preferential access to UK aerospace components for US manufacturers, securing supply chains for aerospace and pharmaceuticals. The agreement establishes a new trading relationship for steel and aluminum, with negotiations for an alternative to Section 232 tariffs.

Commitments to high-standard provisions in intellectual property, labor, environment, and digital trade, though the UK’s 2% Digital Services Tax (DST) remains a sticking point, with the US expressing disappointment over its retention. Strengthens economic security through cooperation on investment security, export controls, and ICT vendor security. The deal is not a comprehensive free trade agreement but a framework for ongoing negotiations, with details on digital trade, pharmaceuticals, and other sectors still to be finalized.

The US maintains a 10% baseline tariff on most UK goods, higher than the 2.5% pre-Trump rate. UK officials aim to negotiate further reductions to the 10% tariff and address remaining reciprocal tariffs. US stakeholders, including Wisconsin Manufacturers and Commerce and Nebraska Governor Jim Pillen, praised the deal for providing stability and boosting exports. UK officials, including Chancellor Rachel Reeves and Treasury Minister Darren Jones, highlighted job protection (150,000 jobs) and benefits for carmakers like Jaguar Land Rover and the steel industry.

Prime Minister Starmer called it a “fantastic, historic day,” emphasizing job creation and economic stability. Some analysts view the deal as limited, with many tariffs remaining and unresolved issues like the UK’s DST and services trade (a significant part of US-UK trade). UK farmers, via the National Farmers Union, expressed concerns about increased competition from US agricultural imports, particularly bioethanol.

The American Automotive Policy Council criticized the deal for prioritizing UK vehicles over USMCA-compliant vehicles from Canada and Mexico. The deal’s selective tariff reductions may violate WTO’s “most favored nation” principle, potentially inviting legal challenges or retaliation from other countries. The deal is expected to have a limited immediate economic impact due to its narrow scope and ongoing negotiations.

US markets showed a muted response, with stocks rising modestly but enthusiasm fading. UK businesses, particularly in steel and automotive sectors, see it as a lifeline, but uncertainty persists regarding implementation timelines and supply chain conditions. This is the first trade deal since Trump’s “Liberation Day” tariffs on April 2, 2025, which imposed up to 50% duties on 57 trading partners, later paused for 90 days until July 9, 2025.

The UK, not hit by the higher reciprocal tariffs, benefited from its relatively balanced trade with the US ($148 billion in goods trade in 2024). The deal may serve as a template for negotiations with other nations like India, Japan, and South Korea, though challenges remain due to larger trade imbalances. The agreement aligns with the UK’s post-Brexit strategy to offset reduced EU trade and the US’s push for reciprocal trade under Trump’s tariff strategy.

The deal has been signed, but implementation details, particularly for steel, aluminum, and pharmaceuticals, are still under negotiation, with potential delays until the end of June or later. Both sides continue to work on finalizing provisions, with the UK seeking to reduce the remaining 10% tariff and the US pushing for changes to the DST. This trade deal marks a significant step in US-UK economic relations, leveraging their historical alliance to address tariff barriers, but its limited scope and ongoing negotiations suggest it is more a starting point than a fully realized agreement.