US-UK trade deal: What’s really on the table for both nations?

US President Donald Trump and British Prime Minister Keir Starmer on May 08 announced that the two nations have reached a ‘historic agreement’, the first such deal since the implementation of reciprocal tariffs by Trump. 

While briefing the media at the White House, Donald Trump said, "This morning I am thrilled to announce that we have reached a trade deal with the UK. Today is the Victory Day for World War II, we won together exactly 80 years ago, so there could be no more perfect morning to reach this historic agreement."

The White House said that the limited bilateral trade agreement (BTA) will bring in $6 billion in external revenue from its 10-per cent tariffs on British exports, which remains in place, and it would also bring in $5 billion in new export opportunities for the United States. The agreement would lead to more beef and ethanol exports to the UK, and it will also streamline the processing of US goods through customs. 

The UK on the other hand has agreed to lower its tariffs to 1.8 per cent from 5.1 per cent and provide greater access to US goods. The deal seeks to double trade between the two nations to $120 billion by 2030.

No concrete information was provided by the two countries, and the final details of the deal are yet to be fleshed out. “The final details are being written up,” Trump said. “In the coming weeks, we’ll have it all very conclusive.”

The US runs a trade surplus with the UK, which makes it easier to find common ground, as Trump has staked his tariffs on specifically eliminating the annual trade deficits with its trade partners that he says have taken advantage of the US. Trump also downplayed the UK deal as template for other trade negotiations, he suggested that other countries may end up with much higher rates as they enjoy a huge US trade surplus.

US total goods trade with the UK was estimated at $148.0 billion in 2024. US goods exports to the UK in 2024 were $79.9 billion, up 7.6 per cent ($5.6 billion) from 2023, while US goods imports from the United Kingdom totalled $68.1 billion in 2024, up 6.0 per cent ($3.9 billion) from 2023. The US goods trade surplus with the UK was $11.9 billion in 2024.

The trade framework grants the US greater market access and a quicker customs process for exports to the UK, while the UK receives limited relief on duties for cars, steel, and aluminium. However, many aspects of the deal are still to be negotiated.

Trump had imposed an additional 25 per cent tariff on cars and auto parts from the UK, on top of the existing 2.5 per cent. Under the new deal, UK car manufacturers can export the first 100,000 vehicles to the US each year at a reduced 10 per cent tariff, but any additional vehicles will be subject to a 27.5 per cent rate. Since cars are the UK's largest export to the US—approximately worth $ 11.9 billion last year—this could significantly affect the UK's auto industry.

The UK will maintain its digital services tax, which is a concern for US tech giants, with only a vague commitment to work on a future digital trade agreement. Additionally, the two countries have yet to reach a resolution on Trump's plans for sweeping pharmaceutical tariffs. While the UK has removed tariffs on certain US agricultural goods, strict food regulations remain in place.

There were also discrepancies in the statements made by the US and UK regarding some key aspects of the deal. The UK government said that US tariffs on steel and aluminium from the UK would be eliminated, but the White House less than an hour later stated that they would "negotiate an alternative arrangement" for these duties, and that the framework establishes a new "trading union" for these materials.

Trump’s first trade agreement since April 2 sparked a surge on Wall Street, with major US indexes climbing more than 1 per cent at one point. The S&P 500's passenger airlines index rose 5.4 per cent, driven by a 7.2 per cent increase in Delta Air Lines stock, following US Commerce Secretary Howard Lutnick's announcement that British-made Rolls-Royce engines would be imported into the US duty-free.

The Nasdaq Composite gained 1.07 per cent, while the S&P 500 and Dow Jones both saw increases of around 0.6 per cent.

Trump's administration had been facing pressure from investors to finalise deals and ease trade tensions, as his often-unpredictable policy decisions had disrupted global trade, creating risks of inflation and potentially pushing both the US and global economies toward a recession.