Trump, Starmer hail ‘historic' US-UK trade deal, but 10pc tariffs on British exports remain unchanged

Malay Mail

09-05-2025

Starmer says 'historic' deal to expand US-UK trade
Deal opens 'a tremendous market' for the US — Trump
Deal is first since Trump launched global tariff war
Baseline 10 per cent tariff on UK goods to remain, Trump says
WASHINGTON, May 9 — US President Donald Trump and British Prime Minister Keir Starmer yesterday announced a limited bilateral trade agreement that leaves in place Trump's 10 per cent tariffs on British exports, modestly expands agricultural access for both countries and lowers prohibitive US duties on British car exports.
The 'general terms' agreement is the first of dozens of tariff-lowering deals that Trump expects to land in coming weeks after upending the global trading system with steep new import taxes aimed at shrinking a US$1.2 trillion (RM5.1 trillion) US goods trade deficit.
Trump hailed the deal in the Oval Office with Starmer patched in on a speaker phone, as US Treasury Secretary Scott Bessent and top trade negotiator Jamieson Greer head to Switzerland to launch negotiations with Chinese negotiators.
He pushed back against seeing the UK deal as a template for other negotiations, saying that Britain 'made a good deal' and that many other trading partners may end up with much higher final tariffs because of their large US trade surpluses.
In April, Trump imposed reciprocal duties of up to 50 per cent on goods from 57 trading partners including the European Union, pausing them days later to allow time for negotiations until July 9. He has also heaped new 25 per cent tariffs on auto imports, ended all exemptions on steel and aluminum duties, and announced new tariff probes on pharmaceuticals, copper, lumber and semiconductors. This week he added movies to the list.
'It opens up a tremendous market for us,' Trump told reporters, noting that he had not fully understood the restrictions facing American firms doing business in Britain.
'This is a really fantastic, historic day,' Starmer said, noting that the announcement came nearly at the same hour 80 years ago when World War Two ended in Europe. 'This is going to boost trade between and across our countries, it's going to not only protect jobs, but create jobs, opening market access.'
The two leaders heralded the plan as a 'breakthrough deal' that lowers average British tariffs on US goods to 1.8 per cent from 5.1 per cent but keeps in place a 10 per cent tariff on British goods.
A UK official told reporters that the United States and the United Kingdom have more serious work to do, and noted the deal did not include Washington's demand for restructuring of Britain's digital services tax, levied at 2 per cent of UK revenue for online marketplaces. Washington could revisit the issue, but there was no agreed process for doing so, the official said.
'This is not a finished, classic 'bells and whistles' free trade agreement. It started off as a tactical response to President Trump's tariffs, but actually morphed into a more substantive trade deal,' the official said. 'And it will be built on. ... We've done the Oval Office, now we've got more serious work to do.'
Trump's first trade deal fuelled a rally on Wall Street, sending major US indexes briefly up over 1 per cent. The S&P 500 passenger airlines index closed up 5.4 per cent, led by a 7.2 per cent surge in Delta Air Lines (DAL.N) as US Commerce Secretary Howard Lutnick said British-made Rolls-Royce engines would enter the US duty-free.
Trump's administration has been under pressure from investors to strike deals and de-escalate its tariff war after the US president's often chaotic policymaking upended global trade with friends and foe alike, threatening to stoke inflation and tip the global and US economies into recession.
Lutnick told CNBC yesterday that Washington will roll out dozens of trade deals over the next month.
Trump's biggest challenge, however, is resolving a virtual trade embargo between the US and China, with tariffs of 145 per cent and 125 per cent, respectively on each side. Greer and Bessent will lead talks with Chinese officials in Switzerland, on Saturday and Sunday. Trump said the talks would be substantive — more than an ice-breaker — and predicted the tariffs would come down.
Britain's Prime Minister Keir Starmer speaks on the phone to US President Donal Trump at a car factory in the West Midlands May 8, 2025. — Alberto Pezzali/Pool/Reuters pic
Warm relationship, some disappointment
The British-American Business group expressed disappointment that the deal leaves in place Trump's 10 per cent tariffs for many products, including cars, raising costs for UK exporters. It said it hoped that the deal would be a start of deeper US-UK trade integration including the digital economy.
The deal will provide potential new export opportunities for American producers worth US$5 billion a year, Lutnick said, while the higher tariffs would generate US$6 billion in annual US revenue.
It will reduce US tariffs on British auto imports to 10 per cent from the current 27.5 per cent, according to a UK statement. The lower rate will apply to a quota of 100,000 British vehicles, almost the total exported to the US last year.
US tariffs on imports from the struggling UK steel industry will fall to zero from 25 per cent, while Britain's 19 per cent tariffs on US ethanol will fall to zero through a 1.4 billion-litre (370 million gallon) quota that far exceeds US exports last to the UK last year.
Both sides have agreed to new reciprocal market access on beef, with UK farmers given a first-ever tariff-free quota for 13,000 metric tonnes.
There will be no weakening of UK food standards on imports, despite repeated entreaties by the US side.
Crucially there will be no weakening of UK food standards on US beef imports, which was an election manifesto pledge for the Labour government. That means US beef bred with growth hormones still won't be allowed in.
US Agriculture Secretary Brooke Rollins said the deal would 'exponentially increase' US beef exports to Britain.
But much depends on whether American beef could compete with the British beef on price and find favour with British consumers.
Currently 100 per cent of the fresh beef sold by Britain's two biggest supermarket chains Tesco and Sainsbury's is British and Irish.
Details were scant on tariffs on UK pharmaceuticals imports, which could damage AstraZeneca and GSK, although a White House fact sheet said the deal would create a secure pharma supply chain.
The US agreed to give Britain preferential treatment in any further tariffs imposed under Section 232 national security investigations, which include ongoing probes of pharmaceutical and semiconductor imports. GSK and AstraZeneca declined comment.
In addition to assurances 'future-proofing' Britain from additional sectoral tariffs, the UK official also welcomed Trump's assurance during the Oval Office event on finding ways to avoid his new push to tariff foreign-made movies.
Starmer's government has been seeking to build new trading relationships post-Brexit with the US, China and the EU without moving so far towards one bloc that it angers the others.
With the British economy struggling to grow, the tariffs had added to the pressure on his government.
Jaguar Land Rover paused its shipments to the US for a month and the government was forced to seize control of British Steel to keep it operating.
Economists and one FTSE 100 chief executive said the immediate economic impact of a tariff deal was likely to be limited, but that trade agreements in general would help long-term growth. Britain struck a free trade agreement with India this week. — Reuters