While the base tariff rate of 10% on UK exports to the US remains unchanged, the deal includes specific changes to export and import tariffs across a wide range of sectors – including steel, aluminium, automotive manufacturing and agriculture. The full details and subsequent impacts of these changes are not yet clear, but our experts have provided their immediate reactions to the announcements and what it might mean for UK businesses.
Contents:
A new trade deal
UK Automotive Industry
Steel & Aluminium
Key customs changes
It’s been a big week for the government with two trade deals and an interest rate cut delivering some positive economic progress and welcome reassurance, which is being cautiously welcomed by businesses. By their nature, trade deals are generally a good thing for business, offering security and aiding planning and investment, so to that end this deal is to be welcomed.
A further deal with the EU is also expected within this month. These deals, along with the endorsement of global leaders, reinforce the UK’s reputation as a reliable trading partner offering at least some clarity amid significant geopolitical uncertainty whilst also demonstrating to investors that the UK is committed to global trade.
With more detail to come over the coming days, weeks and even months on the US-UK agreement, the much-lauded benefits of this deal are yet to become clear. The phrase ‘reciprocity and fairness’ was liberally used by both parties, each keen to demonstrate to their voting public the strength of the relationship between nations. Whether or not we end up in a position better than the one before 3 March 2025 remains to be seen.
For some, when placed in context of the UK’s pre-’Liberation Day’ position, the new deal may be experienced by some as less of a step forward, more than five steps back, two steps forward - and tariffs will undoubtedly still pose challenges for many businesses.
From an international tax perspective, those businesses transporting goods between the US and UK will have been keeping a careful eye on the customs and tariff announcements, of which we heard some detail relating to automotive, farming and aerospace.
Those in the tech and services industry waited with bated breath to hear if the UK had conceded its Digital Services Tax (DST) as part of the deal, as this tax primarily impacts US multinationals. However, DST was not mentioned by the President specifically, and the small print suggests that, for now, it remains.
Despite this, the overall sentiment from UK business for this deal and others will be positive. In our April Business Outlook Tracker, which monitors UK business optimism, 69% of large business respondents* said they were postponing investment decisions due to US tariff uncertainty – and whilest only one piece of the puzzle, clearer direction from such a significant trading partner can only be good for decision making.
*Grant Thornton’s Business Outlook Tracker is a survey conducted by Censuswide of over 200 decision makers from large businesses (defined as turnover >£1bn) headquartered in the UK
For the UK automotive industry, this deal offers some much-needed respite.
The announcement confirms that up to 100,000 units exported to the US will see tariffs reduced from 27.5% to 10%. For units over this limit the higher tariff rate will remain, something manufacturers will have to keep in mind when seeking to expand their export strategies.
The double whammy of the trade deal and the Bank of England’s interest rate cut will be welcomed, with the rate cut making borrowing costs cheaper and potentially boosting domestic consumer confidence, stimulating UK sales.
Already facing twin pressures from global over supply and rising production costs, the effects of US tariffs could have been terminal to the UK’s steel and aluminium industries. In 2024, the UK exported 180 thousand tonnes of semi-finished and finished steel to the US, worth £370 million. This accounts for 7% of the UK’s total steel exports by volume and 9% by value. For now, there is one less problem for the industry but it’s far from being out of the economic woods, and there will be further issues to navigate around measures such as the UK’s Carbon Border Adjustment Mechanism.
The economic value of the steel and aluminium industries is also significant, and given the recent nationalisation of the steel industry, politically this is, at least in those terms, highly notable.
The industries’ directly employed workers, supply chains and the tertiary industries that feed into UK steel and aluminium production account for a significant number of jobs in the UK. The reassurance that this deal will bring to them should be noted, bearing in mind the economic benefit of their employment and the costs to the Government should we have seen the industries collapse.
The details to be published over the coming weeks will be key in determining how successful the negotiation has been.
The key customs change so far relates to reduction in tariffs for key sectors, particularly automotive, steel, aluminium and aerospace. For most other sectors the 10% tariff will remain.
Given that this is badged as a significant deal, this might be a signpost for the outcome of other negotiations. Does the 10% tariff for most products become the future US negotiation baseline? This makes mitigating the impact of the additional tariff worthy of consideration.
Recent changes to US trade tariffs, and the effects on global exports and supply chains, have left businesses tackling significant uncertainty.
Read the advice from our scenario modelling team on what businesses can be doing now to mitigate risk and to effectively plan for a changing future.
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