US and UK forge historic trade deal slashing tariffs on steel and cars

Friday 09 May 2025 - 08:31

By: Zahouani Ilham

US and UK forge historic trade deal slashing tariffs on steel and cars

US President Donald Trump and UK Prime Minister Keir Starmer have announced a historic trade agreement aimed at reducing tariffs between the two countries. The deal, which marks the first significant announcement since Trump reignited a global trade war in January, will result in the reduction of tariffs on British steel and cars exported to the US.

The agreement was unveiled on the 80th anniversary of VE Day, a symbolic occasion commemorating the joint efforts of the US and the UK in defeating Nazi Germany. Under the terms of the deal, tariffs on British steel and aluminum exports to the US will drop from 25% to zero. Additionally, a 27.5% tariff on an annual quota of 100,000 British cars sold to the US will be reduced to 10%.

In exchange, the UK has agreed to lower tariffs on US goods from 5.1% to 1.8% and offer more access to its market for American products. Despite these changes, the US will maintain its 10% "baseline" tariff on most trading partners, a measure introduced in the previous month.

President Trump emphasized the vast new market opportunities this deal creates, describing it as a "tremendous" and "fantastic" moment for both nations. Sir Keir Starmer echoed the sentiment, calling it a historic day.

The deal comes at a time when the US has faced growing pressure to ease its tariff policies, which have contributed to global trade disruptions and economic uncertainties. These policies have raised concerns about inflation and the risk of a recession.

The UK, meanwhile, has struggled with a slow-growing economy and has been under additional strain due to the tariff war. For example, Jaguar Land Rover halted its shipments to the US for a month, and the UK government had to take control of British Steel to prevent its collapse.

While seeking favorable terms with the US, the UK has been cautious about maintaining its food standards, which align closely with the European Union's regulations. The UK farming trade union has, however, indicated that US producers adhering to certain standards might be allowed greater access to the UK market.

As the UK looks to establish new trade relationships post-Brexit, the government remains mindful of domestic political risks, especially with its unpopularity and the potential backlash from taxing multinational tech companies. Despite this, the UK government will continue its digital service tax, introduced in 2020 to address tax avoidance by major tech firms.