The recently announced UK-US trade agreement has provided sector-specific relief for Britain while offering political optics for Washington, but analysts at ING warn the deal is unlikely to signal a broader retreat from protectionist tariff policies.
President Trump revealed the UK as the first nation to receive exemptions from selected US tariffs introduced in recent months. While the carve-outs are limited, the agreement is being framed as a diplomatic and economic win for both nations.
'At face value, the UK seems to have done quite well – at least relative to the reports circulating in recent days,' ING economists write. Under the agreement, tariffs on British steel and aluminium will drop to zero, without the imposition of quotas. UK car exports will be capped at 100,000 vehicles annually but will face reduced tariffs of 10%, rather than the 27.5% levied under current US policy. Given that cars comprise around 10% of British exports to the US, this is a notable concession.
Crucially, the UK has made minimal concessions in return. 'Britain reportedly won't make changes to its Digital Services Tax... And importantly, the UK has said it isn't changing its food standards.' These standards, which have remained largely aligned with the EU since Brexit, represent a significant non-tariff barrier to US agricultural products such as beef and chicken.
The agreement also avoids jeopardising Britain's future negotiations with the European Union. 'The UK hopes to conclude a veterinary deal with the EU... which would remove the most cumbersome checks at the border and would see Britain formally aligning on food standards.'
Despite the headlines, ING economists caution that the macroeconomic effects will be marginal. 'The impact on the UK economy of these changes will be fairly negligible, given the direct hit from Trump's tariffs wasn't huge in the first place.'
For Washington, the deal signals a flexible posture on tariffs amid growing investor concern over trade policy. 'The deal enables the President to offer the sense of flexibility that financial markets are craving. The reaction – higher equity prices, a stronger dollar, higher Treasury yields – shows that it has had the desired effect.'
The agreement may also serve as a vehicle for increasing pressure on China. Comments from Commerce Secretary Lutnick suggest the US may encourage the UK to adopt stricter anti-dumping measures against Chinese metals.
Still, ING remains sceptical that this deal will lead to broader tariff reductions. 'A UK deal was relatively low-hanging fruit... Other countries, whose manufacturers are more direct competitors, may find it harder to negotiate carve-outs from Trump's auto tariffs.'
Moreover, the US's average tariff rate has risen from 2% to 23% since President Trump took office, with only modest contributions from tariffs on steel, aluminium, and autos. 'A de-escalation with China is realistically the only thing that can meaningfully move the dial on the tariff hit.'
ING concludes that while the UK deal provides targeted economic relief and political messaging value, it does little to reverse the global trajectory of rising trade protectionism.
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