UK and US reach agreement on tariff trade terms; UK to ease imports of US food and agriculture for reduced tariffs on UK car exports.

UK and US reach agreement on tariff trade terms; UK to ease imports of US food and agriculture for reduced tariffs on UK car exports.

In a significant move aimed at easing trade tensions, the UK and the United States have reached an agreement on tariff trade terms. The deal, expected to be announced on Thursday, focuses on reducing tariffs on specific goods and includes provisions to ease imports of US food and agriculture products in exchange for reduced tariffs on UK car exports.

The agreement is part of ongoing negotiations between the two nations, with a particular focus on automobiles, steel, and pharmaceuticals. Automobiles are a key area of interest, with the UK's car industry set to benefit from a potential reduction in the 25% tariff on car imports from the UK. The UK, in turn, is expected to lower its 10% tariff on US car imports to 2.5%, as per the demands of the US [1].

Steel and aluminum tariffs, which came into effect in March, are also set to be addressed. The UK currently imposes a 10% tariff on US car imports, but it is expected to lower this in line with the agreement. Additionally, the UK may introduce a quota system for cars, allowing a certain number of cars to be imported under low or zero tariffs, with additional charges for vehicles exceeding the quota [1].

Pharmaceuticals, a major export for the UK, are also expected to be a part of the agreement, although the specifics remain unknown. The UK's second-biggest export to the US is medicinal and pharmaceutical products, worth £6.6bn ($8.76bn) last year. The agreement aims to keep medicines affordable, with no tariffs on finished drugs [1].

The deal also includes provisions for the UK to lower its digital services tax on US firms in exchange for lower tariffs on UK car and pharmaceutical exports. The tax, which applies to businesses that run social media, search engines, or online marketplaces, is expected to be reduced, although the specifics are yet to be announced [1].

Food standards, however, will not be included in the deal. The UK has chosen to align with the EU on this matter, and food standards such as allowing imports of chlorinated chicken or hormone-treated beef will not feature in the agreement. This decision is driven by domestic political considerations [1].

The agreement is expected to be a limited deal, focusing on specific items and covering a short-term period. It is also expected to be followed by months of negotiations and legal paperwork. The deal, while not a major trade agreement, signals the direction of the US president's global trade war and is seen as a step towards reducing trade tensions between the two nations [2].

The impact of the agreement on businesses and consumers is yet to be fully understood. Amazon, for instance, has recorded one-time charges of roughly $1 billion due to customer returns and tariff-related maneuvering in the first quarter of 2025. The company's stock dropped about 2% in after-hours trading following the announcement [2].

In conclusion, the UK and US agreement on tariff trade terms is a significant step towards easing trade tensions. The deal focuses on reducing tariffs on specific goods and includes provisions to ease imports of US food and agriculture products in exchange for reduced tariffs on UK car exports. The specifics of the agreement are yet to be fully announced, but it is expected to be a limited deal, covering a short-term period and followed by months of negotiations and legal paperwork.

References:
[1] https://vocal.media/journal/what-might-be-included-in-the-uk-us-tariff-agreement
[2] https://www.businessinsider.com/amazon-billion-hit-customer-returns-tariffs-2025-5