UK and US reach agreement on trade deal terms: Limited to specific industries, with 10% benchmark tariff retained

On Thursday (May 8) local time, US President Trump stated that the UK and the US had reached an agreement on the terms of a tariff and trade deal.

In a social media post, Trump said that Thursday would be a "very important and exciting day" for both countries, and that the White House would provide more details at a later press conference.

He also wrote, "The trade deal with the UK is a comprehensive and complete agreement that will solidify the relationship between the US and the UK for many years to come. Given our long history and shared aspirations, the UK is our first announced agreement partner, with many more to follow, all of which are currently in serious negotiations!"

Despite Trump's grandiose rhetoric, any agreement is likely to be limited in practice. The US-UK trade deal has never been promoted as a comprehensive free trade agreement, which typically takes years of negotiations to reach.

A UK official said that Thursday's announcement would outline general terms and focus on specific industries, with UK Prime Minister Starmer scheduled to speak about the agreement later in the day. The US is the UK's largest trading partner, importing goods and services worth 179 billion pounds (222 billion US dollars) from the UK annually.

A spokesperson for the UK Prime Minister's Office stated, "The US is an indispensable ally for our economy and national security. Negotiations on an agreement between our two countries are ongoing, and the Prime Minister will provide an update later today."

It is understood that the UK government has agreed to make concessions on importing US food and agricultural products in exchange for the US reducing tariffs on British car exports. The US, however, has retained a 10% base tariff, which US government officials view as the minimum requirement for trading partners.

US government officials have stated that retaining the 10% base tariff is a precaution against some manufacturers evading tariffs by changing the final assembly or packaging location of their goods.

Multiple polls indicate that Americans are increasingly dissatisfied with Trump's handling of the economy. Thursday's agreement suggests that Trump is seeking to back away from his plan to raise US tariffs to their highest levels in a century. Trump stated that as he works to eliminate barriers to US exports and ease market turbulence caused by tariffs, more trade agreements will be reached.

So far, negotiations between the US and several countries have, at best, resulted in a basic agreement centered around commitments and intentions, with many details traditionally included in comprehensive trade agreements likely to be negotiated later.Other countries that have held high-level talks with the US include Japan, India, and Israel.

Regardless of the announced terms, the relationship between the UK and the US, its largest single trading partner, will still be worse than before Trump initiated the tariff war, providing a potential point of attack for Stammer's domestic political opponents.

As the Trump administration investigates the pharmaceutical industry, the UK is also exploring the possibility of avoiding tariffs on pharmaceuticals, a major export from the UK to the US. Trump recently threatened to impose tariffs on another of the UK's advantageous industries—the film industry—adding another sector that the UK needs to protect. The expansion of tariffs from goods to services is an ominous sign for the UK's service-oriented economy.

Update: The US and UK governments subsequently released more details of the trade agreement.

As part of the US-UK trade agreement, the US will maintain a base tariff rate of 10%. Trump stated at a press conference that this is not a template for future agreements. "This number is low; they got a good deal."

Trump indicated that tariff rates for other countries could be "much higher" because "they have huge trade surpluses and, in many cases, they have not treated us fairly." He added that the base tariff rate of 10% is non-negotiable.

The US-UK trade agreement removes barriers in the UK market for US exports of ethanol, beef, fruits, vegetables, animal feed, tobacco, and other products. Under the agreement, the vehicle quota for UK automakers subject to a 10% tariff is limited to 100,000 units per year, after which a 25% tariff will apply.

Trump said, "This trade agreement includes billions of dollars in increased market access for US exports, particularly in agriculture, significantly expanding market access for US beef, ethanol, and nearly all products produced by our great farmers."

Notably, Trump also claimed that the final details of the agreement would still be negotiated in the "coming weeks." However, under the agreement, the UK will expedite the customs clearance process for US goods and reduce barriers to agricultural, chemical, energy, and industrial exports.

UK Prime Minister Stammer subsequently stated that the US-UK trade agreement would eliminate tariffs on UK steel and aluminum, reducing them to zero, and would provide "unprecedented access for US farmers without compromising our high standards."

Stammer added, "We are sending a message to the world that the UK is open for business: seeking a trade agreement with India on Tuesday, reaching a trade agreement with the US today, and working to promote trade with other partners, including, of course, the EU."

The two sides still have differences on some key details, indicating that the trade agreement was hastily arranged. Shortly after Starmer announced that the US would reduce tariffs to zero on steel and aluminum from the UK, the White House issued its own description, stating that instead of directly eliminating tariffs, it would seek a "substitute solution" through negotiations.