UK-US tariff deal: Cars, steel and beef

President Donald Trump has recently signed an executive order to reduce tariffs on some British goods entering the US. This move is part of a larger deal that the UK hopes will extend to other products sold to the States. However, it’s important to note that this executive order is not a comprehensive trade deal.

When the agreement was first announced in May, Trump touted it as a “major trade deal” on social media. However, it is not a full-fledged trade agreement as it would require approval from the US Congress. The current deal only reverses or reduces tariffs on specific goods.

One significant aspect of the deal is the reduction in car tariffs. The executive order signed by Trump will lower the tariff paid by US-based firms on imports of British cars. Previously, a 25% tax was imposed on UK cars and automotive parts, along with a 2.5% levy. This has now been reduced to 10% for up to 100,000 UK cars, matching the number exported last year. Any cars exported beyond this quota will face a 27.5% tax. The UK, in turn, maintains a 10% levy on US car imports.

Another key area that remains unresolved is the steel and aluminium tariffs. While negotiations had initially reduced the tariff on these products to zero, a finalized agreement is still pending. Without a deal by July 9th, the tariff could double to 50%. The UK exports around £700 million worth of steel and aluminium to the US annually, with an additional £2.2 billion in products made with these materials.

Pharmaceuticals are another crucial aspect of the deal that is yet to be determined. Both countries have committed to negotiating preferential treatment outcomes for pharmaceutical products. The UK exports £6.6 billion worth of pharmaceuticals to the US, making it a significant component of bilateral trade.

Overall, while the reduction in tariffs on certain goods is a positive step, there are still unresolved issues and uncertainties surrounding the broader trade relationship between the UK and the US. The outcome of negotiations on steel, aluminium, and pharmaceuticals will be critical in shaping the future of trade between the two nations. The UK and US have recently finalized a trade deal, but some key points remain unchanged. One of the sticking points in the negotiations was the UK’s digital services tax, which imposes a 2% tax on businesses that run social media, search engines, or online marketplaces if they exceed certain revenue thresholds. US tech giants like Meta, Google, and Apple easily meet these thresholds, resulting in nearly £360m in tax revenue for the UK in the first year alone.

Despite calls from the US government to address the tax, the UK has not made any changes to it. Instead, both parties have agreed to work on a digital trade deal moving forward. The US government has criticized the tax as discriminatory and unjustified, urging the UK to remove it promptly.

In terms of food standards, the trade deal includes provisions for US beef exports to the UK. The UK has eliminated a 20% tariff on a quota of 1,000 metric tonnes and raised the quota to 13,000 metric tonnes. In return, the UK has secured a similar quota at a lower rate compared to other countries. Importantly, the UK has emphasized that there will be no compromise on food standards, ensuring that American hormone-treated meat will not enter the UK market.

Additionally, the trade deal includes a tariff-free quota of 1.4 billion litres of US ethanol for the UK. Previously, US ethanol shipments faced a 19% tariff, but now British farmers are concerned about the impact of cheaper US ethanol on domestic firms. The National Farmers Union has raised concerns about the inclusion of a significant volume of bioethanol in the deal, highlighting potential challenges for British arable farmers.

Overall, while the UK-US trade deal has seen some progress in certain areas, unresolved issues such as the digital services tax and potential impacts on food and ethanol industries remain. It will be important for both parties to continue working towards a balanced and mutually beneficial trade relationship.