The UK-US Trade Deal

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The UK-US Trade Deal

The UK-US Trade Deal

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May 9, 2025

On 8 May 2025, the United Kingdom and the United States announced a limited trade agreement, rolling back a small number of the tariffs imposed by President Trump in March and April 2025. Both sides referred to this agreement as an "Economic Prosperity Deal", and negotiations on the long-awaited post-Brexit free trade agreement are expected to continue. The headlines are a reduction in tariffs on U.S. imports of cars from the UK, and the elimination of tariffs on U.S. imports of steel from the UK, while the U.S. has focused on expanded U.S. market access in the UK. The 'General Terms' for the agreement have been published (but are not legally binding), and negotiations will continue to develop formalise, and implement these terms.¹

While providing welcome relief to the UK car and steel industries, the agreement does not tackle the wider issue of the broad 10% tariff on almost all U.S. imports from the UK. Before President Trump's wave of tariffs in March and April 2025, the U.S. had generally very low tariffs on imports, averaging 2.2%.² The majority of UK businesses still face far higher tariffs when exporting to the U.S. than they did two months ago. The UK government has stressed that "thousands of jobs have been saved" by the new agreement with the U.S., with Prime Minister Keir Starmer responding to questions on remaining tariffs with “the question you should be asking is: ‘is it better than it was yesterday’?”.

This agreement follows closely after the UK's deal with India on 6 May 2025, signalling a desire to increase momentum in Britain's post-Brexit trade strategy.

Based on UK and U.S. government announcements, and the General Terms published , here's what we know so far:

What has been included?

Tariff reductions

The agreement primarily focuses on providing relief from the sweeping tariffs announced by the Trump administration in April 2025, with reciprocal elements reducing UK tariffs. Key provisions include:

Automotive sector: tariffs on UK cars imported into the U.S. will drop from 27.5% to 10%. This is subject to a quota of 100,000 cars annually, which the UK government has noted as almost the total the UK exported last year. This is a significant reduction. However, it is worth noting that before April's tariffs, the effective U.S. tariff rate on completed cars was about 2.2%.²
Steel and aluminium: the U.S. announcement states that it has agreed to remove the 25% tariff imposed on UK steel and aluminium in March 2025 and negotiate an "alternative arrangement".⁴ The General Terms refer to the U.S. "constructing a quota" of most-favoured nation rates for UK steel and aluminium, once the UK meets certain requirements on security of supply chains. The UK government has stated that this 25% tariff has been negotiated down to zero. The effective U.S. tariff rate for iron and steel imports before the March 2025 tariffs was about 5.3%.⁵
Farming and agriculture: the UK and U.S. have agreed reciprocal market access on beef, with a tariff free quota for 13,000 metric tonnes of UK beef imported into the U.S., and the UK removing its 20% tariff on U.S. beef. The White House statement referred to a US$250 million opportunity for U.S. farmers in agricultural products, like beef. The UK announcement was silent on non-beef agricultural products, but noted that there would be '"no weakening" of UK food standards.
Tariffs on UK imports of ethanol from the U.S. will also be reduced to zero. This was previously subject to a duty rate of £8.50/100 litre.⁶ The White House statement valued this export opportunity at over US$700 million, and the UK National Farmers Union has expressed concern about the impact on UK arable farmers who grow crops to produce bioethanol.⁷
On pharmaceutical products, the UK and U.S. "intend to promptly negotiate significantly preferential treatment outcomes on pharmaceuticals and pharmaceutical ingredients". This is, as with steel, dependent on the UK meeting supply chain security requirements, which are not specified in the General Terms.
On non-tariff barriers to trade, the White House statement referred to the deal reducing or eliminating "numerous non-tariff barriers that unfairly discriminated against American products" and ensuring streamlined customs procedures for U.S. exports. The General Terms also flag that the UK and U.S. intend to build on existing Mutual Recognition Agreements with additional agreements on industrial goods, and advance towards an agreement on services regulation.
The UK government has emphasised that the Digital Services Tax, which largely affects U.S. tech companies, will remain unchanged. However, the U.S. and UK will work towards a digital trade deal that will "strip back paperwork for British firms trying to export to the U.S.". The General Terms flag that financial services will be included in the scope of new digital trade provisions intended to increase trade in this area.

What next?

The agreement will now need to be formalised and implemented by both governments. Negotiations are due to continue on developing the detailed terms, and on sectors including pharmaceuticals and remaining reciprocal tariffs. The White House statement also referred to the agreement committing the U.S. and UK to work together to enhance industrial and agricultural market access. In the meantime, the U.S. has agreed that the UK will receive "preferential" treatment in consideration of tariffs imposed under s. 232 investigations.

More broadly, UK governments have long aimed for a full post-Brexit free trade agreement with the U.S. This Economic Prosperity Deal is a limited rollback of some recent U.S. tariffs in exchange for some improved U.S. market access to the UK. Negotiations for a full free trade agreement will continue, and the concessions made by both sides in this deal will likely affect negotiating positions.

There remains a risk of a legal challenge to the compatibility of this agreement with WTO law, but such questions may only become clear when the details are published.

Dentons' global trade practice advises firms across the globe on international trade matters, including the operation of trade agreements. For more detailed advice in relation to this agreement, please get in touch with any of the contacts named below or your usual Dentons contact.