Trump, Starmer Hail Breakthrough US-UK Trade Deal, but 10% Duties Remain

WASHINGTON/LONDON, May 8 – In a significant yet restrained move on the global trade front, U.S. President Donald Trump and UK Prime Minister Keir Starmer have jointly unveiled a new bilateral trade agreement. The deal, though described as a milestone by both leaders, maintains the United States’ 10% tariffs on many British exports, including vehicles, even as it opens the door to future tariff reductions and expanded market access between the two nations.

Announced from Washington, with Starmer participating remotely, the trade accord is the first of what the Trump administration claims will be a wave of agreements aimed at recalibrating the U.S. trade deficit, which has ballooned to $1.2 trillion. According to Trump, this agreement is tailored to the unique relationship between the United States and the United Kingdom and should not be seen as a template for deals with other nations.

Substantive Gains, But Not Without Criticism

The agreement reduces the average tariff that the UK places on American products from 5.1% to just 1.8%, offering a significant boost to U.S. exporters, particularly in agriculture and manufacturing. A major feature of the deal is the removal of the UK’s 19% duty on American ethanol, which now permits up to 1.4 billion liters to enter the British market without tariffs—surpassing past trade figures by a wide margin.

Another key element of the deal is the reduction in U.S. tariffs on cars made in the UK, lowering the rate from 27.5% to 10% for up to 100,000 vehicles each year—closely matching the number Britain shipped to the U.S. over the past year. British steel also sees a reprieve, as U.S. tariffs on imports from the struggling sector are dropped to zero, a move that comes amid ongoing efforts by the Starmer government to stabilize British Steel, including a recent state intervention.

Despite these wins, several key issues remain unresolved. One of the most prominent points of contention is the continuation of the 10% U.S. tariff on a wide range of British exports, drawing concern from business groups on both sides of the Atlantic. The British-American Business association voiced disappointment, stating that the agreement falls short in eliminating cost burdens for UK exporters, especially the automotive sector.

Additionally, the deal sidesteps the U.S. demand for changes to Britain’s digital services tax, a 2% levy on revenues earned by online platforms operating in the UK. According to UK officials, the matter remains open for further negotiation, though no formal process has been agreed upon.

Political Symbolism and Economic Calculations

In announcing the deal, Starmer drew a symbolic connection to the historic moment of Europe’s World War II victory 80 years ago, calling the agreement a “historic day” for both nations. He emphasized that the pact would not only sustain jobs but also generate new employment opportunities through expanded market access.

President Trump echoed the sentiment, highlighting what he described as a breakthrough for U.S. exporters. “It opens up a tremendous market for us,” he remarked, while also noting his surprise at the regulatory challenges previously faced by American companies trying to operate in the UK.

The agreement’s rollout had an immediate impact on financial markets, sparking a rally in U.S. equities. Airline stocks, in particular, saw significant gains, with Delta Air Lines jumping over 7% amid news that British-made Rolls-Royce engines would now enter the U.S. market duty-free.

Commerce Secretary Howard Lutnick revealed that this agreement is only the beginning, with dozens of similar deals set to be announced in the coming month. However, analysts caution that the economic boost from this specific deal may be modest in the short term, with the true benefits likely to manifest over a longer horizon.

Still looming is the far more complex challenge of resetting trade relations with China. U.S. officials are set to meet their Chinese counterparts in Switzerland, where talks will aim to reduce the hefty tariffs—some as high as 145%—that currently burden bilateral trade. President Trump confirmed that these discussions would be substantive rather than ceremonial.

Agriculture, Movies, and Mutual Assurances

The deal also grants U.S. farmers tariff-free access to the UK beef market for the first time, with a 13,000-metric-tonne quota. However, Britain’s stringent food safety standards remain in place, meaning that American beef containing growth hormones remains banned—an issue that has long stirred political controversy.

Agriculture Secretary Brooke Rollins expressed optimism, suggesting the new arrangement could significantly boost U.S. beef exports. Yet whether U.S. beef will gain traction among British consumers remains to be seen, especially considering that major UK retailers currently source all fresh beef domestically or from Ireland.

On another front, the UK received assurance that it would be exempted or given preferential consideration in future U.S. tariff actions under national security clauses—known as Section 232 investigations. This includes sectors such as pharmaceuticals and semiconductors, where active investigations are ongoing.

The UK’s film industry also received some protection, as Trump agreed to explore ways to avoid imposing new tariffs on foreign-made movies—an idea floated earlier this week that had sparked alarm in creative circles.

As Britain continues its post-Brexit efforts to forge independent trade policies, the Starmer administration is balancing between closer ties with major economies like the U.S., EU, and China, without alienating any bloc. With domestic economic growth stagnating and pressure mounting, such trade deals offer both political capital and long-term economic potential.

While far from a comprehensive free trade agreement, the limited pact signals a thaw in recent trade tensions and lays the foundation for deeper integration in the years ahead. The road ahead may be complex, but for now, both leaders appear satisfied to mark this as a step in the right direction.