The Farce of the Deal

The US-UK Trade "Deal" Achieves Basically Nothing—and That's a Bad Sign for "Deals" to Come

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Last week, British negotiators signed a historic, comprehensive trade agreement with a major global economy—in India. They also inked a tiny, slapdash, informal farce of a trade “deal” with the United States.

The US-UK “deal” is the first and only one the US has negotiated since Trump paused tariffs above 10% on countries besides China for 90 days. In the short text of the agreement, the only actual tariff reduction America formally commits to is reducing the 25% car tariff to 10% for the first 100k vehicles exported from Great Britain. Washington promises to create a similar system for British steel & aluminum, but provided exactly zero details on what this actually means. In the press conference, US Commerce Secretary Howard Lutnick also promised that aircraft engines & parts would be exempted from US tariffs, but this was a lie—the official document does not even mention planes. In “exchange”, the US gets some tiny tariff-free quota for beef and ethanol exports. In practice, this means trade policy between the two countries is still several times more restrictive than before Trump took office.

To say this “deal” is tiny would be an understatement—it is microscopic. The United Kingdom is a relatively small US trading partner, only representing about 2% of American goods imports (that’s less than Vietnam, Taiwan, Ireland, India, or Italy), and this deal only reduced tariffs on about 14% of those British goods. The overall impact on US trade restrictiveness is functionally unnoticeable—the Trump administration’s quiet decision to indefinitely delay tariffs on Mexican/Canadian auto parts was roughly 5-6x more impactful. It would not be inaccurate to characterize this entire episode as basically a PR tour for slightly lower tariffs on Aston Martins & Bentleys.

If this is all that can be achieved with the UK, a close NATO ally who runs a trade deficit with the US and has long been desperate to sign a real free trade agreement post-Brexit, it does not portend well for other trade negotiations. Even assuming all non-China countries can achieve the same proportional reduction in their April 2nd tariffs as the UK, the average US tariff rate would still be 34% when the 90-day pause lapses in July. Keep in mind that the US would have to “negotiate” more than a dozen separate “deals” over the next sixty days to approximate this result, even if they only focused on major trading partners. In the meantime, the US keeps drawing up more tariffs—just in the last month, it has begun plans for taxes on imported trucks & aircraft worth a combined ~$60B.

Still, the contours of this UK-US “deal” are at least instructive for how the US will be approaching trade policy in the near future. The administration is clearly dead-set on keeping tariffs of at least 10% for most goods, hence why they refused to exempt British cars from tariffs entirely. Yet there is some more flexibility on the sector-specific tariffs than initially indicated—and after seeing tariff reduction for British cars, other major vehicle exporters will certainly be demanding similar concessions. The US is also clearly trying to force countries to join an anti-China trade bloc in key sectors like steel & aluminum to get relief from US tariffs, hoping to push them to impose their own restrictions on Chinese exports. And it is focusing on securing cheap & easy symbolic “wins” for agricultural & energy exporters. Still, overall US tariffs are not being lowered in any meaningful way.

Details on the Deal

The only concrete tariff reduction America agreed to in this “deal” with the UK was a tariff-rate-quota system for British cars. This means the first 100k vehicles exported to the US will face “only” a 10% tariff, and all subsequent imports will face the full 25% tariffs previously imposed. That would lower tariffs on the vast majority of UK car exports, as Americans only bought 110k British vehicles in 2024, but it is also clearly designed to guarantee exports remain below their current relatively low levels.

Indeed, the United Kingdom only makes up about 4% of US vehicle imports, behind the EU, Japan, South Korea, Mexico, and Canada, and is heavily concentrated in the high-end segment—the main vehicles imported are Land Rovers, Bentleys, and BMWs, plus some Mini Coopers. The idea of these foreign luxury cars permanently facing lower tariffs than the more middle-class and American-made offerings of GM, Kia, Honda, etc is obviously untenable both to American car companies and to other foreign governments that Trump wants to negotiate with. The UK “deal” should thus be understood as an example of the White House’s end goal in vehicle tariff negotiations—a lower but nonzero tariff rate, as long as vehicle exports to the US are forced to decrease.

Beyond the reduction in car tariffs, the closest tariff reduction from the US side was a promise to develop a tariff-rate-quota system for British steel & aluminum once the UK meets American demands for “the security of the supply chains” and “ownership of relevant production facilities.” This is a clear broadside at China, using tariffs as negotiating tools to shut them out of other export markets and force them to divest from foreign steel & aluminum manufacturing assets.

More broadly, the agreement emphasizes that both countries should aggressively enforce rules-of-origin to “prevent non-participants from using our bilateral arrangement to circumvent tariffs” in another clear effort to prevent Chinese goods from being shipped through the UK to the US. Like with the car tariffs, this should be interpreted as an example of the administration’s end goal in other steel & aluminum trade negotiations—“we’ll lower tariffs on key metals, so long as you agree to shut out China.”

It’s unclear how comprehensive this steel and aluminum tariff-rate-quota system would be, but Downing Street interpreted it as a 0% tariff on all British exports. Given how small the British metals industry is and the fact that total tariff-affected imports are less than $1B, it would be fairly trivial for the US to give the UK a quota large enough to functionally exempt it from tariffs. However, again, the document did not give any concrete details on how this agreement will actually take shape.

Finally, the US also makes nebulous promises that the UK will be first in line to negotiate when America imposes long-threatened tariffs on major sectors like electronics, lumber, semiconductors, and more. Particularly important is the White House’s promise “to promptly negotiate significantly preferential treatment outcomes on pharmaceuticals”, as drugs are the UK’s second-largest US-bound export behind cars. Still, pharmaceuticals are currently exempt from all tariffs, so even if the UK receives preferential treatment after tariffs are imposed, its drug industry will still face much higher trade barriers than it does today. This entire “deal” offers no pathway to actually normalize trade relations between the US and one of its closest allies.

Conclusions

At the current pace, Trump will only be able to sign three of these “deals” before the 90-day tariff pause ends in early July. If the White House tried hard, they could likely accelerate this pace by cobbling together similar slapdash “deals” with small trading partners like India, Australia, or Israel. However, this is clearly not a tenable long-term strategy, as there seems to be no coherent plan for negotiations with America’s major trading partners like the EU, South Korea, or Japan—let alone China, who still faces tariffs of 145% on most goods.

Yet this whole episode is most reminiscent of Trump’s “agreements” with Mexico and Canada from the start of this year. At first, there was an attempt at the theater of negotiations (remember when Canada appointed a fentanyl czar to secure a one-month delay in tariffs?), but even this theater was dropped rather quickly, and Trump just began making unilateral increases and decreases in tariffs. If the President is going to back down from the massive tariffs set to be re-imposed in 60 days, it will likely be via face-saving unilateral retreat, not an avalanche of “deals” like this—and no matter what, tariffs will remain significantly higher than when he first took office.