The UK’s achievement in becoming the first country to strike a trade deal with Donald Trump in the wake of his tariff onslaught marked a political win for Prime Minister Keir Starmer vindicating his “softly, softly” approach to the US president. But the economic benefits for Britain may be more limited — and the agreement offers a sign of things to come for other nations trying to avoid a global trade war.
The framework unveiled by the two leaders on Thursday goes some way to reversing the worst impacts on the UK of US tariffs announced on “Liberation Day” last month. The premier said he had saved thousands of jobs in Britain’s automotive industry by negotiating down levies on cars to 10% from 27.5% on a quota of 100,000 vehicles per year, roughly the current level of UK exports. Tariffs on steel and aluminium were slashed to zero from 25%.
On a day laced with symbolism for the alliance between the two nations — the 80th anniversary of the end of World War II in Europe — Starmer dialled into the Oval Office to make the announcement with Trump. He called the deal “fantastic;” for Trump it was “tremendous.”
Starmer’s team believe they have secured the best outcome possible currently, giving the UK the most favourable trading relationship with the US of any country. The prime minister said it showed his approach had paid off: “Serious pragmatism defeats performative politics any day of the week,” he told reporters and auto workers at a Jaguar Land Rover plant after his appearance with Trump.
Allies of the prime minister are particularly happy to have secured a commitment from the White House for preferable treatment on any future sectoral tariffs. That “provides some guarantee that the UK will retain a relatively advantageous position when it comes to trade with the US,” said Raoul Ruparel, a former UK trade negotiator who now works for Boston Consulting Group.
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Still, the 10% baseline reciprocal tariffs on other goods remains for America’s historic ally after Trump rejected British efforts to get them removed. While Starmer will try to negotiate that down in future, the US was clear in talks over recent weeks that they were not ready to go beneath that floor, leaving Britain no choice but to focus on reducing the sectoral levies instead, UK officials said, speaking on condition of anonymity discussing private negotiations.
Any growth benefit to the UK of the deal will only be “modest,” according to Jamie Rush and Dan Hanson of Bloomberg Economics. They said the autos carve-out would see the risk to gross domestic product reduced by just 0.1 percentage points.
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That means while the UK is pleased it finds itself in a better place on US tariffs compared to a week ago, it is still worse off than before Trump first announced his levies roiling markets and economies worldwide. The reality was laid bare in a graphic produced by the White House showing the negotiations had seen UK tariffs on US goods fall to 1.8% from 5.1%, while US levies on UK goods rose to 10% from 3.4%, boasting a one-sided outcome in America’s favour.
“While there are some positive tangible commitments to take away from this, ultimately it’s an agreement to carry on negotiating,” said Allie Renison of SEC Newgate, a former UK government trade adviser. “The immediate reduction in US tariffs on auto imports from the UK is a welcome, but it’s still well above what we faced before Trump’s increases.”
Nevertheless, Brexit means the UK has been able to be more nimble than the trading bloc it left five years ago. The European Union, which on Thursday threatened the US with fresh tariffs on €95 billion (US$110 billion) worth of US goods if negotiations to ease American tariffs fail, has so far made little progress and the bloc expects many of Trump’s taxes to stay.
“Whereas the option of retaliation was not really available to the UK due to its much smaller economy, the EU can inflict some damage on the US via tariffs and other measures,” said Sam Lowe, who heads the international trade practice at the consultancy Flint Global. “This potentially gives it more leverage, but also means any deal will probably take longer.”
US-UK Automotive Trade Is One-Sided | US new-vehicle import value exceed exports by 10 to 1
The deal secured by Britain suggests Trump’s negotiations with other trading powers like the EU, India and South Korea will mostly be an exercise in damage limitation rather than offering any real opportunity to tear down barriers to trade and mitigate the economic hit.
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For the UK, however, there’s greater symbolism in being the first nation to strike a deal with America, because it signals the so-called special relationship can endure Trump’s challenge to decades of Western military and economic alliances. Starmer said it showed he was right to ignore “siren voices” calling for him to break ties with Trump.
That reassurance is particularly pertinent as Trump’s efforts to end Russia’s war in Ukraine enter a particularly sensitive phase. British officials are privately optimistic that the president has become more sceptical of Russian President Vladimir Putin’s motives and more sympathetic to Europe’s position.
One UK official compared Thursday’s pact to the US-Ukraine resources deal signed last week, which also had limited economic impact but handed Trump a domestic win. Anything that strengthened the transatlantic relationship at this testing time was worthwhile, the person argued. British officials credited their ambassador in Washington, Peter Mandelson, with getting them to the front of the queue thanks to his relationship with Treasury Secretary Scott Bessent.
Andrew Griffiths, trade spokesman for the opposition Conservative Party, called the deal “quite disappointing,” citing its lack of provisions to help the financial industry or protect sectors like pharmaceuticals and film production. “The right thing is for the UK government to get back round the table immediately and carry on to get to that proper agreement — that sort of agreement that we were seeking — which this absolutely is not,” Griffiths told the BBC, referring to numerous rounds of post-Brexit trade negotiations under Tory prime ministers from Theresa May to Rishi Sunak.
While the outcome of the talks fell well short of the full free-trade agreement promised by Brexit campaigners, its focus on narrow sectors allowed the UK to stand its ground on red lines like food standards. In turn, that’s allowed Starmer to simultaneously strike agreements with India and the US this week, without jeopardizing efforts to improve economic ties with the EU ahead of a summit in London on May 19. Lowering food standards to strike a wider-ranging US deal would have been politically difficult domestically but also threatened the chances of an EU reset.
Starmer will also be relieved to be credited with a diplomatic success just days after his governing Labour Party lost a set of local elections and he faced growing criticism from within his party to take a different direction on the economy. Agreeing deals with India, the US and the EU in quick succession would help wrestle back the political narrative in his favor, an ally said.
“Where no other government has so far succeeded, the UK has achieved tangible results and is now in the unique position of having a framework to work with,” said Matthew Oresman, partner at Pillsbury. “For the UK government, today marks a crucial move toward procuring a protective shield and gaining back some control. The reins are still held by the US, though, as tariffs remain in effect in many areas.”
