09 May 2025

United Kingdom | Trade deal with United States announced

  • On 8 May 2025, the UK and US announced a trade deal aimed at reducing tariffs and non-tariff barriers, enhancing market access and streamlining customs processes for key sectors.
  • The US will reduce tariffs on UK-origin cars from 27.5% to 10% for the first 100,000 vehicles annually and eliminate the 25% tariffs on UK-origin steel and aluminum, which were imposed earlier in 2025.
  • In exchange, the UK will remove tariffs on US-origin ethanol and make concessions on agricultural and industrial products, while also providing a tariff-free quota for 13,000 metric tons of beef from UK farmers.
  • Clients in affected industries should prepare for changes in trade dynamics, including potential cost savings from reduced tariffs and increased market opportunities, while remaining vigilant about ongoing negotiations and future trade agreements.
 

Executive summary

The United Kingdom (UK) and the United States (US), on 8 May 2025, announced their agreement on a trade deal, marking the first of several planned agreements the US is seeking to negotiate since the announcement of US President Trump's Reciprocal Tariff Policy in April 2025.

The US and the UK announced the conclusion of a trade deal to help avert current and future tariffs on key sectors of both economies, unlock new market access opportunities through a reduction of non-tariff barriers and streamline customs processes.

US concessions

In concluding the deal, the US has committed to (1) reduce the current 27.5% tariffs on UK-origin cars to 10% for the first 100,000 vehicles each year and (2) eliminate the current 25% tariffs on UK-origin steel and aluminum.

US steel and aluminum tariffs came into effect for the UK on 12 March 2025, and tariffs on automotive exports were imposed on 3 April 2025 — both were imposed under Section 232 of the Trade Expansion Act 1962.

When the trade deal was announced, US Commerce Secretary Howard Lutnick referenced future concessions for key businesses to increase trade and investment, including the aerospace industry.

UK concessions

In return, the UK has offered to reduce tariff and non-tariff barriers to US-origin exports, including by:

  • Removing tariffs on US-origin ethanol
  • Making tariff concessions on agricultural, machinery and other industrial products
  • Increasing UK and US economic and national security cooperation through bilateral adjustments to export control frameworks and protections for key domestic industries

"Reciprocal market access" will be provided on beef with UK farmers given a tariff-free quota for 13,000 metric tons. UK food standards will not be impaired by US imports.

Specific details on the deal will be finalized over the coming weeks. The deal does not represent a comprehensive Free Trade Agreement between the UK and the US.

The deal is one of several planned deals from the US administration, which has been negotiating with US trade partners since early April 2025.

This is the second trade deal the UK has announced this week, following the conclusion of a comprehensive Free Trade Agreement with India after three years of negotiations. The official text for the UK-India FTA has not yet been published.

US-EU relations

The European Union (EU) has announced plans to ramp up pressure to push the US towards trade negotiations and is planning on proposing countermeasures worth €95b on US-origin imports, should negotiations fail to remove existing US tariffs on EU-origin goods.

The potential measures seek to counteract the recent US tariffs on cars, as well as broader tariffs, by targeting US wine, fish, aircraft, cars and car parts, chemicals, electrical equipment, health products and machinery.

The potential measures would be imposed in addition to an initial package of EU retaliatory tariffs that are due to come into force on 15 July 2025 and will seek to counter the US tariffs on EU-origin steel and aluminum.

To support the drafting of the measures, the EU is expected to open a public consultation period through 10 June for EU Member States and businesses to provide their views.

The EU is further expected to file a dispute against the US at the World Trade Organization (WTO) regarding the various US tariffs.

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Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United Kingdom)

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

Document ID: 2025-1025