Keir Starmer and Donald Trump were on good terms during the prime minister’s state visit to Washington DC in February. Image: Simon Dawson / No 10 Downing Street
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Donald Trump will cut tariffs on UK car imports to 10%, with import taxes on steel and aluminium slashed to zero, as part of a new UK-US trade deal which prime minister Keir Starmer has described as a “platform for the future”.
In return, the UK will remove the tariff on ethanol for US goods, and provide “reciprocal market access on beef”. Grey areas remain on what this market access will entail, but Starmer has claimed that Britain’s food safety “red lines” will not be compromised.
The tariff reductions are part of a 12-month “temporary arrangement”; Britain and the US hope to confirm a more comprehensive trade deal in the coming months.
It’s a welcome development for the beleaguered prime minister, after weeks of uncertainty triggered by Trump‘s so-called “liberation day” tariffs.
Asked if the UK was better off than it was six months ago, Starmer – speaking at a Jaguar Land Rover factory – rejected the question.
“The question you should be asking is, is it better than where we were yesterday?” he told reporters.
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“And I think you should come out when you’re finished asking me questions and talk to the workforce here, because what this [deal] does is to reduce to zero the tariffs on steel and aluminium. Look how important that is.”
The deal “will protect British businesses and save thousands of jobs In Britain”, he added.
Trump claimed that the deal will make both the UK and the US “much bigger in terms of trade”.
“The US and UK have been working for years to try and make a deal and it never quite got there,” he added. “It did with this prime minister, so I want to just congratulate you.”
What are Donald Trump’s import taxes?
In early April, the president announced a suite of punitive import levies on America’s trade partners – including a baseline 10% tariffs on UK exports and a 25% taxes on our car exports, steel and aluminium.
The tariffs sent global markets spiralling. The International Monetary Fund (IMF) estimated that Trump’s tariffs could reduce global economic growth by 0.5% through next year.
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British manufacturers such as Jaguar Land Rover, Aston Martin and Rolls-Royce were set to be badly impacted. The US accounted for £6.4 billion worth of UK car exports in 2023 – 18.4% of the total – and the tariffs put 25,000 car industry jobs at risk.
Under the arrangement announced today, British car makers will be given a quota of 100,000 that will be able to be sent to American shores at the 10% rate. This is just shy of the total number of cars that were sent last year.
“We warmly welcome this deal,” said Adrian Mardell, chief executive officer at Jaguar Land Rover, “which secures greater certainty for our sector and the communities it supports. We would like to thank the UK and US governments for agreeing this deal at pace and look forward to continued engagement over the coming months.”
Likewise, steel tariffs would have been enormously damaging, said steel union Community’s assistant general secretary Alasdair McDiarmid.
“The UK government deserves enormous credit for negotiating this deal to remove US tariffs which would have had a hugely damaging impact on our steel sector. This new agreement will protect jobs here in the UK, save our industry tens of millions of pounds a year and provide much-needed certainty to enable future investments.”
Trump described the deal as “maxed out”. However, British ambassador Peter Mandelson insisted that the arrangement was ”just the beginning”.
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“There is more we can do in reducing tariffs and trade barriers so as to open up our markets to each other even more than we’re agreeing today,” he said.
Campaigners had feared that the UK would reduce the Digital Services Tax – a 2% levy on the revenue big tech companies – as part of the deal. But the UK government denied any changes to this tax.
“Instead the two nations have agreed to work on a digital trade deal that will strip back paperwork for British firms trying to export to the US – opening the UK up to a huge market that will put rocket boosters on the UK economy,” a spokesperson said.
Marley Morris, associate director for trade at IPPR thinktank, praised the government for “playing its hand well.”
“Today’s deal is the second big win for UK trade this week. The government managed to negotiate lower tariffs on steel and cars exported to the US, while maintaining clear red lines on food standards,” he said.
“Contrary to expectations, there was also no change to the UK’s digital services tax. Instead, the government compromised by agreeing tariff reductions on items like beef and ethanol.”
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