The UK-US trade deal has received a mixed response from market observers, with most remaining guarded about its long-term prospects.
Hailed as a 'breakthrough and great deal' by US president Donald Trump on Thursday, the US-UK pact is the first for his administration since imposing — then pausing — sweeping "reciprocal" tariffs against all trading partners in early April.
Under the deal:
US tariffs on British cars fall to 10% for the first 100,000 vehicles exported to the US. Trump had originally placed import taxes of 25% on cars and car parts coming into the US on top of the existing 2.5%.
US tariffs on UK steel are scrapped.
The UK reduces tariffs on US products, including beef and ethanol.
The agreement on beef provides a tariff-free quota for 13,000 tonnes of US exports, but the UK government said this would involve no reduction in food standards.
Overall, a 10% tariff on most imports remains in place.
Prime minister Keir Starmer hailed the conclusion of the US-UK trade agreement as a “fantastic, historic day” and said it will save thousands of jobs in the car and steel industries.
The trade agreement was confirmed in a call between the prime minister and the US president which was broadcast live on both sides of the Atlantic.
The London stock market, however, didn't move much either with the anticipation of the deal or its announcement. The FTSE 100 (^FTSE) closed 0.3% lower on the day, and lagged behind its European peers. The FTSE 250 (^FTMC) only delivered minor gains.
Rolls-Royce (RR.L) shares, however, jumped as it emerged as a big winner from the trade deal as it won’t be subject to tariffs on aircraft engines shipped to Boeing (BA) in the US.
“The UK-US trade deal might look significant but markets weren’t impressed at first glance. On the whole, the information was too vague,” said Dan Coatsworth, investment analyst at AJ Bell.
He added there were considerable unknowns around the true price the UK has paid for getting the deal over the line.
"The devil will be in the detail and we don’t have the full facts yet. Trump and Starmer implied it is a game-changer, saving tens of thousands of UK jobs and potentially creating economic prosperity. It suggests the UK is at the front of the queue of countries in Trump’s good books. While the 10% base tariff remains, relative to other countries this has to be taken as a win."
He said the UK has set the standard for what’s possible and that gives it a first-mover advantage.
"Simply confirming the lay of the land for UK companies who do business in the US is a big step forward, as it removes uncertainties. Companies can make plans on how to deal with tariffs and they can start looking more to the future rather than fearing what might be round the corner," Coatsworth said.
Oxford Economics, an economic research and consultancy firm, said the deal provides limited relief from tariffs.
"The deal announced with the UK focused on limited relief from autos and steel & aluminium tariffs ... the broader 10% reciprocal tariff remained in place. Exemptions will nibble away at the effective tariff rate, with the baseline 10% not going anywhere," said Michael Pearce, deputy chief economist.
He added the deal did not touch more contentious issues, such as opening healthcare markets to US providers, or the UK's digital services tax.
"We are not minded to change our forecasts based on this deal, or likely future deals. The bigger open question right now is what happens with tariffs on China — we assume in our May baseline that tariffs will fall from 100% rates at present to closer to 60% from next year. Shifting that forward would help reduce the downside risks to the economy this year from supply chain disruption and uncertainty."
The British Chamber of Commerce (BCC), meanwhile, said it was a "huge sigh of relief".
“The reduction in the 25% tariffs on most of our automotive exports and the removal of levies on steel and aluminium are the biggest wins," said Shevaun Haviland, director general of the BCC.
“These sectors had been left reeling as jobs, investment and sales were all cut or put on hold. This framework agreement will give them some much-needed certainty. They will be keen to see it quickly enacted so they can swiftly re-establish orders and supply chains."
She added the UK must continue to push the argument for free and fair trade across all economic sectors and that tariffs are a lose-lose position.
“Our bilateral trade is already worth £300bn, we have £500bn invested in the US and it has £700bn of investment stock in our economy.
“There is a high-level of co-dependency in our economic relationship, and it is in both our interests to continue building upon those strong foundations which have developed over decades."
Earlier this week, the UK finalised a trade deal with India. It paves way for big tariff reductions on scotch whisky and car exports to India. Levies on aerospace, electricals and other food products will also fall. UK consumers are also expected to benefit from tariffs being reduced on some Indian goods such as clothing imported to the country.
The agreement is expected to boost bilateral trade by 40%, potentially increasing the UK's GDP by £4.8bn over 15 years.
