The UK-US ‘Framework’ Trade Deal announced by President Trump
Andrew Thurston · Posted on: May 9th 2025 · read
Yesterday, President Trump and Prime Minister Starmer finally confirmed the news that the United States and the United Kingdom had agreed an ‘Economic Deal’ on trade.
Firstly, this is not a Full Trade Agreement, like the recently agreed UK-India Trade deal. This UK-US deal is more of a means to mitigate the Trump Tariffs and allows for concessions on both sides, some of which will have been part of President Trumps agenda at the start of his 2nd Term in Office.
Although the announcement will provide relief to many UK businesses, there is still some way to go before a final agreement is signed by the two parties.
Key Tariff issues remain
One important point is the continuation of the 10% ‘Liberation Day’ tariff imposed on the majority of UK imports. This was expected as recent announcements on the US-Japan trade discussions suggested that the 10% tariff was non-negotiable and therefore any likelihood of the UK avoiding this measure was always unlikely.
For many UK exporters this will be a frustration as they attempt to maintain levels of trade with the US whilst having the weight of the 10% tariff placed on the supply chain.
The Office of National Statistics has suggested that 17% of UK businesses will be impacted by the US tariffs, as the cost of raw materials and components increase due to global responses to the current tariff war.
There are reports of increased container costs due to the imbalance of freight across the globe. Although not to the same degree as experienced during Covid, these are additional cost pressures that are unlikely to be planned when determining the ‘landed price’ of imported commodities.
For exporters selling into the US, there are also reports that the cost of storing goods within a US Bonded Warehouse has increased sharply in recent weeks due to extra demand. This deal will help avoid the need for bonded warehousing and help UK businesses with maintaining profitability in the US market.
Automotive sector relief
The deal brings welcome news for the UK automotive industry, which faced a sharp 25% tariff on exports to the US starting April 2025. This sudden cost spike led major manufacturers like Jaguar Land Rover to temporarily halt US shipments.
Under the new framework with immediate effect, UK vehicle exports will benefit from an annual quota allowing 100,000 units at a reduced 10% tariff, significantly below the prior 27.5% rate. However, with recent export figures approaching this cap, some vehicles may still incur the full 27.5% duty, creating ongoing pricing challenges.
The quota allows the import of UK-manufactured vehicles at a tariff of just 10%. This is a reduction of 17.5% and mirrors the current UK tariff rate on imported automobiles. The agreement also waives the existing 2.5% tariff on automobiles, which presents a significant benefit to UK manufacturers when compared to competitors in the EU and Far East.
Although a significant ‘win’ for the UK Automotive Sector, there remains a potential tariff cost on UK exports of £900m (down from $2.25bn). This remains a considerable cost which was not part of the supply chain prior to April. It will be interesting to see how UK manufacturers manage the 10% tariff and if this cost will result in increased prices for consumers in the US.
For UK importers receiving vehicles from the US, the same concession has not been negotiated. The announcement supports a position of ‘mutual recognition’ meaning the same duty rate applies on both sides of the Atlantic.
"The reduction in tariffs on UK car exports into the US is very welcome news for the UK automotive sector. I am pleased that the Government acted quickly to come to this agreement with the US and hope it forges a path to further reducing trade barriers and an even more positive contribution to economic growth for both the U.K. and the US"
Steel Industry
For the UK steel sector, the announcement is a major boost. The immediate removal of the 25% tariff on UK-manufactured steel products promises to restore competitiveness and stabilise a critical industry that has struggled under the weight of US trade restrictions.
Time will tell.
Other key provisions of the UK-US Trade Deal
- UK will get preferential treatment in any further tariffs imposed by the US as part of Section 232 investigations.
- US Tariff Quota, of 100,000 units per annum, introduced on imports of UK-manufactured vehicles. Quota reduces total tariffs from 27.5% to 10%.
- Immediate removal of 25% tariff on affected Steel products.
- Immediate removal of 25% tariff on aircraft parts of aluminium and steel.
- Removal of UK tariffs on US Ethanol.
- US Tariff quota of 13,000 metric tonnes on British Beef resulting in reduced tariffs.
- Agreement for $10bn of Boeing aircraft to be purchased by UK companies.
- Streamlined UK customs procedures for import of US goods.
- Increased market access for US imports of American beef, ethanol, and virtually all agricultural products.
Next steps
Both countries have provided announcements on the deal, but the White House announcement provides greater detail. As this is the initial phase of the deal, further negotiations on the technical aspects of the agreement will be completed over the next couple of months with a final agreement to be signed.
Fact Sheet: U.S.-UK Reach Historic Trade Deal – The White House
To discuss the implications of the UK-US trade deal for your business, feel free to reach out to Andrew Thurston. With extensive experience in international trade and customs, Andrew can provide valuable guidance on navigating these complex changes.
