US-UK Trade Deal: A Step Forward, But 10% Tariffs Still Cast a Shadow

The U.S.-U.K. trade deal announced in May 2025 marks a rare diplomatic win for both President Trump and Prime Minister Starmer. Yet, beneath the headlines, the agreement’s narrow scope and lingering 10% tariffs raise critical questions for investors. While sectors like steel and automotive gain relief, the broader economic impact remains constrained by unresolved tariff barriers. Here’s what investors need to know.

The Deal’s Limited Triumph

The agreement is best described as a “proof of concept” rather than a transformative pact. Key provisions include:
- Steel & Aluminum: The U.S. removed its punitive 25% tariffs on U.K. steel and aluminum, a lifeline for industries like Tata Steel’s Scunthorpe plant.
- Automotive: U.S. tariffs on U.K. cars dropped from 27.5% to 10%, but only for the first 100,000 vehicles annually—a cap that excludes Jaguar Land Rover’s full export volume.
- Tech: The U.K. dropped its 2% digital services tax on U.S. tech giants like Google (GOOG) and Amazon (AMZN), easing tensions with Silicon Valley.

However, the Trump-era 10% baseline tariff on all other goods remains in place. This includes machinery, chemicals, and most agricultural products.

The stock’s muted performance reflects uncertainty over whether Jaguar Land Rover can sustain exports within the 100,000-vehicle quota.

Winners and Losers in Key Sectors

1. Steel & Aluminum: A Clear Win

The elimination of U.S. tariffs on steel and aluminum is a relief for producers like Tata Steel, which had faced existential threats under prior policies. However, global oversupply and China’s dominance in steel production mean U.K. exporters still face steep challenges.

Despite tariff relief, Tata’s stock has shown little upward momentum, signaling broader industry headwinds.

2. Agriculture: Mixed Fortunes

U.S. farmers gained a $5 billion boost from tariff-free access to U.K. beef markets, but risks linger. The U.K. National Farmers Union warned that U.S. bioethanol imports—now tariff-free—could undercut domestic arable crops.

Exports have stagnated near $15 billion annually, suggesting limited upside even with the deal.

3. Pharmaceuticals: Left in the Lurch

The deal explicitly excludes pharmaceuticals, leaving U.K. drugmakers like AstraZeneca (AZN) exposed to the 10% tariff. This omission highlights the political calculus: Trump prioritized sectors with immediate electoral appeal (steel, tech) over long-term industrial competitiveness.

4. Services: The Unseen Engine

The U.S. services sector—banking, advertising, and consulting—faces no tariffs, as the 10% duty applies only to goods. This explains why the U.K.’s $95 billion trade surplus with the U.S. in 2023 relied heavily on services.

Market Reactions and Risks Ahead

Initial market optimism pushed Nasdaq and S&P futures up over 1%, but caution persists. Federal Reserve Chair Jerome Powell warned that lingering tariffs could still fuel inflation, while JPMorgan analysts called the deal “limited in scope.”

Inflation has edged higher, though not yet to crisis levels—a reminder that trade policy’s economic impact is complex.

Investment Implications

• Tech Stocks (GOOG, AMZN): The digital tax concession is a net positive, but investors should monitor follow-up negotiations.
• U.S. Agriculture (TSN, DE): Beef and ethanol exporters gain, but U.K. farmers’ pushback could spur regulatory hurdles.
• U.K. Autos (TTM): Investors should assess whether automakers can scale within the 100,000-vehicle tariff cap.
• Avoid Overexposure: The 10% tariff remains a drag on broader trade, making sector-specific plays safer than all-in bets.

Conclusion: A Start, Not a Finish

The U.S.-U.K. deal is a strategic first step, easing immediate tensions in key industries while laying groundwork for future talks. However, the 10% tariff’s persistence underscores its role as a blunt instrument in Trump’s trade strategy. For investors, the path forward is clear: focus on sectors with explicit relief (steel, tech) and ignore the siren call of a “grand bargain.” Until tariffs are fully rolled back or offset by currency movements, this deal remains more symbolic than structural—a shadow hanging over transatlantic commerce.

Currency fluctuations could soften the tariff’s sting, but the 10% barrier remains a fundamental obstacle.

In the end, the deal’s true value lies not in its immediate economic impact but in its demonstration of diplomatic resolve. Whether that resolve translates into deeper concessions—or backfires into trade wars—will define the next chapter for investors.