Tariffs Down, Trade Up? Will Landmark US-UK Trade deal deliver growth for Great Britain?

US-UK EPD

In what can be called a historical week, last week we not only got a newly elected American Pope but the UK managed to signed a landmark trade deal with the US which had been elusive in previous US Presidential terms.

This is a significant win for the UK, marking a pivotal shift in transatlantic economic relations. Signed by President Donald Trump and Prime Minister Keir Starmer, the deal aims to reduce trade barriers and foster economic growth between the two nations.

A central feature of the agreement is the substantial reduction of tariffs on key exports. The U.S. has agreed to lower tariffs on British car exports from 27.5% to 10%, eliminate tariffs on steel and aluminium via operation of a quota, and allow tariff-free quotas for beef imports. In return, the UK will remove its 19% tariff on American ethanol imports and also open up the market for US exports within agriculture, chemical and machinery sectors.

While the deal has been commended as a win, it may be more a political win rather than an economic win according to experts, as the impact on UK GDP is expected to be small as the vast majority of goods won't benefit from the reduction of tariffs on UK's main exports as the baseline tariff of 10% remains. On a Report issued on the 8th May, Oxford Economics also confirm the deal will not change their current US forecast as the baseline tariff remains untouched and also suggests that in the foreseeable future, tariffs will remain in double digits.

Similarly, The Guardian reported that the new deal has also sparked concerns within certain UK industries. The bioethanol sector, in particular, fears that the influx of cheaper American ethanol could undermine domestic production, threatening jobs and local economies in regions like north-east England and Yorkshire. Despite these concerns, the UK government maintains that the agreement serves the national interest and has initiated discussions with affected sectors to address potential challenges. The deal is seen as a step towards a more comprehensive free trade agreement, with both nations expressing optimism about future negotiations.

According to ONS, in 2022, Greater Manchester traded over £20.6bn worth of goods and services with the US. Total exports amount £12.5bn whilst imports were at just over £8bn giving GM a positive trade balance with the US. The largest proportion of exports from GM fall within the service sectors accounting for 58% (£7.2bn) of the total exports whilst goods account for 42% (£5.3bn). In this context, GM may show more resilience in terms of trade with the US and its current tariff policies, but still within the £5.3 bn, we believe the majority of GM's exports of goods to the US are within the machinery and transport equipment, manufactured goods and chemicals, meaning we will have some businesses facing some challenges in the context of tariffs as mentioned before - the 10% baseline tariff remains.

Key Tariff Takeaways:

• U.S. tariffs on British car exports reduced from 27.5% to 10%.

• Elimination of U.S. tariffs on UK steel and aluminium exports.

• Tariff-free quotas established for UK beef exports to the U.S.

• UK removes 19% tariff on American ethanol imports.

• U.S. maintains a baseline 10% tariff on other foreign goods 

  
  

We believe the agreement represents a significant development in U.S.-UK trade relations, with potential benefits and challenges that will unfold in the coming months, when further details will ne unveiled. We encourage businesses from all sectors to help us understand the ongoing impact of the US Tariffs - either by completing this survey or getting in touch at international@gmchamber.co.uk

Sources: The Guardian, Gov.uk, Oxford Economics

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