UK-USA Free Trade Negotiations
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What is in the US-UK tariff deal?
On 8 May 2025, the US and UK Governments announced the US-UK Economic Prosperity Deal, focused on removing or reducing tariffs in key industrial sectors brought in by President Trump in April. Although the tone of the announcement gave the impression of a full ‘deal’ having been agreed, the document published after the announcement is less clear on both the substance, and timelines, of any agreement. The deal is categorically not a free trade agreement (FTA). Though it contains commitments to reduce tariffs, the document consists mainly of a list of policy areas to be negotiated and implemented at an unspecified, later date. The document states the US and UK are “immediately beginning negotiations of the EPD to develop and formalize the proposals made in this document”.
Unlike the comprehensive UK-India deal announced earlier this week, the published document does not carry the legal authority or breadth of a formal FTA. The document even states that the US and UK “recognize that this document does not constitute a legally binding agreement”. Furthermore, under U.S. law, any FTA would require Congressional approval. Any deal, once fully negotiated and agreed, may also require UK Parliamentary approval and scrutiny.
The US-UK deal does not threaten the prospects for improving UK-EU trade
The US-UK Economic Prosperity Deal appears to have no major implications for ongoing trade negotiations between the UK and EU ahead of the Summit on 19 May. While the US-UK deal does include mentions of reciprocal access to beef markets, there will be no watering-down of UK food standards and will not imply any change to UK SPS rules. Indeed, the National Farmers Union (NFU) has welcomed this aspect of the deal. NFU President Tom Bradshaw said: “We appreciate the government’s efforts in listening to our concerns, particularly around maintaining high standards, protecting sensitive agricultural sectors and securing reciprocal access for beef.” Likewise, there is nothing in the US-UK deal that would impact the ability of the UK and EU to pursue beneficial alignment on goods and services, should both parties wish to do so.
As the UK Government heads into the 19 May UK-EU Summit, the big opportunity for deeper alignment with its largest and most stable trading partner remains in place. The US-UK tariff deal may offer important relief in a few key sectors - even if doubts persist over the long-term reliability of the US as a trading partner. In any event, the US-UK Economic Prosperity Deal is of a different order of magnitude compared to what a strengthened UK-EU relationship could deliver.
Polling commissioned by Best for Britain reinforces this outlook: 44% of Britons believe improving trade with the EU should be the UK’s top priority, more than double the number who say the same about the United States (19%). Meanwhile, independent economic analysis by Frontier Economics finds that regulatory alignment with the EU could increase UK GDP by up to 2.2%, with the Midlands, North East, and Yorkshire and the Humber, areas with strong manufacturing bases and recent local election gains for Reform UK, standing to benefit the most. Together, this underlines that a closer economic relationship with Europe not only delivers growth, but does so across UK regions and constituencies, without jeopardising the wider EU reset.
KEY PROVISIONS OF THE US-UK DEAL:
TARIFF REDUCTIONS
The published US-UK Economic Prosperity Deal, once negotiated and agreed, will aim to reduce tariffs that have negatively impacted certain sectors of the UK economy. The United States has expressed its intention “to provide certain key UK imports with modified reciprocal tariff treatment, based on our balanced trading relationship and shared national security priorities”.
On automotive tariffs, the document states that the US “will create a quota of 100,000 vehicles for UK automotive imports at a 10 percent tariff rate”, though it does not clearly specify when this would be implemented or take effect. When enacted, it would reduce from 27.5% to 10% for a quota of 100,000 UK-made vehicles, equivalent to the UK’s entire exports to the US last year.
The document states that “the United States will promptly construct a quota at most favored nation (MFN) rates for UK steel and aluminum". This is subject to the United Kingdom “promptly meeting U.S. requirements on the security of the supply chains of steel and aluminum products”. Only upon meeting this requirement, will the United States consider “reducing its applied tariff rates…on a range of originating goods in sectors of importance to the United Kingdom”, including steel and aluminium in this instance.
On the issue of ethanol imports, the document states that the United Kingdom will offer the United States a “preferential duty free tariff-rate quota (TRQ) of 1.4 billion litres”. This proposed tariff reduction remains subject to ongoing negotiations.
On the timeline for implementation of tariff reductions, the document states: ”The countries intend to coordinate the timing of their respective tariff reductions to be as soon as practicable, taking into consideration their respective domestic processes”.
AGRIFOOD ACCESS
Reciprocal arrangements on beef have been provisionally agreed. Subject to ongoing negotiations, UK farmers will be given a tariff-free quota of 13,000 metric tonnes, while US farmers will gain access to the UK beef market via a tariff-free quota (TRQ) of 13,000 tonnes of hormone-free beef. Currently, U.S. beef exports to the United Kingdom are subject to a 20 percent tariff within a quota of 1,000 metric tonnes. Once the agreement is finalised, the United Kingdom will remove this 20% tariff.
The document states that both “the United Kingdom and the United States affirm that all imported food and agricultural products must comply with the importing country’s sanitary and phytosanitary (SPS) standards”, meaning there will be no changes or concessions on UK food standards.
Furthermore, according to general terms of the Economic Prosperity Deal, both the UK and US will "commit to working together to improve market access for agricultural products…and to increase agricultural cooperation”.
DIGITAL SERVICES TAX
The UK’s 2% Digital Services Tax will remain unchanged; it currently applies to companies with over £500m in global revenue and at least £25m from UK users, and impacts American firms like Amazon, Facebook owner Meta and Google owner Alphabet Inc.
The document states that the UK and US “confirm that they will negotiate an ambitious set of digital trade provisions”, however the detailed provisions of the negotiations and any suggested timeline remain unspecified.
PHARMACEUTICALS
The EPD states that the US and UK “intend to promptly negotiate significantly preferential treatment outcomes on pharmaceuticals and pharmaceutical ingredients”, with both sides committing to “promptly negotiate significantly preferential treatment” in this sector.
The US has agreed the UK will receive preferential treatment in any future Section 232 investigations, measures which assess the potential impact of imports on US national security, including potential tariff regimes.
NON-TARIFF BARRIERS
Both the US and UK affirm their intent to “accord to conformity assessment bodies of the other treatment no less favorable than that it accords to conformity assessment bodies located in its own territory”. Once agreed, this would mean that each country commits to treating the other’s testing and certification bodies on equal terms with their own, ”including procedures, criteria, fees, and other conditions relating to accrediting, approving, licensing, or otherwise recognizing conformity assessment bodies”. A more divisive issue is that of voluntary standards where the text states that “The United Kingdom and United States intend to discuss the principles and criteria used in order to recognize a standard as an international standard” which, if implemented, has the potential to affect the UK’s future participation in the European standardisation framework and which therefore requires some care from the UK Government.
Both countries intend “to build on an existing set of Mutual Recognition Agreements (MRAs) by negotiating additional agreements, as appropriate, across certain industrial goods and advance toward an agreement on services domestic regulation”. Once the EPD is signed, this will mean mutual recognition of product testing and certification bodies.
Commission Session on UK-USA Trade
On 8th September 2022 the UK Trade and Business Commission took evidence on prospective UK free trade agreements with Canada and the USA.
Evidence taken from:
Emanuel Adam, Chief Trade and Policy Officer, British American Business
Nick Crook, Head of International Relations, Unison
Congressman Brendan Boyle, Member of the US House of Representatives
UK-USA Trade Analysis
Despite the United Kingdom and the United States having been in negotiation talks since May 2020, the US is unwilling to conclude negotiations of the UK-US free trade agreement while the Northern Ireland Protocol Bill remains on the table.
Negotiations of the UK-US free trade agreement are unlikely to proceed even in the event of a change of US administration, as opposition to the Northern Ireland Protocol Bill enjoys bi-partisan support.
The ongoing friction between the UK and the EU over Northern Ireland including the Northern Ireland Protocol Bill is hindering diplomatic relations between the UK and the US beyond the negotiations of a UK-US free trade agreement.
State Level agreements such as the UK-Indiana agreement are not equivalent or comparable replacements for a UK-US free trade agreement as US states are not able to set tariffs.
What is the current status of trade negotiations and what value is placed on them?
Negotiations regarding a UK-US Free Trade Agreement have stalled, with no meaningful negotiations taking place since the Autumn of 2020. The UK Government has admitted that there is little chance of these restarting in the near future because of the issues the US has with the UK’s actions around the Northern Ireland Protocol.
The Commission heard that the stalling of negotiations was also due to general hesitance towards FTAs from the US side. The UK Government has presented a Free Trade Agreement with the US as an early priority following the UK’s exit from the EU. However, the US sees less value in the Free Trade Agreementthis, with Congressman Brendan Boyle emphasising that it was not a priority for theis US administration. The previous US administration has instead focused instead on negotiating trade deals with China and its Northern American neighbours, Mexico and Canada.
While negotiations between the UK and the US federal government have stalled, the British Government has undertaken talks with individual US states, leading to the signing of a Memorandum of Understanding (MOU) with the states of Indiana and North Carolina. Since only the US Federal Government can sign trade deals, these MOUs are not legally binding and do not replace a Free Trade Agreement Nick Crook suggested that these MOUs were being pursued by the UK as part of a public relations campaign to cover for the lack of progress on a UK-US Free Trade Agreement.
What impact would a potential trade deal have on the UK?
The witnesses differed on the opportunities a potential Free Trade Agreement would create. The Commission heard that a deal could lead to an increased partnership between UK and US institutions and tech hubs. Emmanuel Adam also noted that there would be significant benefits in production and regulatory alignments. However, there were some questions about the size of impact a Free Trade Agreement would have on UK trade and exports. The UK and US are already strong economic partners and yearly trade between them is around £223billion. Nick Crook highlighted that according to estimates from the Department of International Trade a Free Trade Agreement would increase this trade by £15billion.
However, here it was emphasised that there is no prediction from the Department on the time period in which this benefit would be realised. For reference, trade between the UK and the US increased £23billion between the four quarters to the end of Q1 2022 from the four quarters to the end of Q1 2021. As highlighted already, the UK-US Free Trade Agreement has often been touted as the most significant post-Brexit trade deal for the UK. However, Nick Crook noted that the increase in bilateral trade by £15billion would do little to replace the loss of British exports caused by the UK leaving the EU.
Relevant Sessions
