8 May 2025
If you are covering the announcement of the trade deal between the UK and the US, please find below a comment from Lindsay James, investment strategist at Quilter:
“The first trade deal to be announced by the White House was secured by the UK on VE Day, symbolism that was heavily underlined by both the prime minister and the president as both went to great lengths to emphasise their unity at a time when US support for Europe has been regularly questioned.
“The contents of the deal remain very limited in their totality and we await the full detail before we can say if there is a winner from this negotiation. However, for the UK this deal appears to be ultimately favourable for some of its largest exports, specifically cars, auto parts and aerospace engines to name some of the key areas. It is no surprise, therefore, that share prices of the likes of Rolls Royce and Melrose have risen sharply due to the news tariffs have been reduced, or in some cases eliminated.
“The UK car industry desperately wanted some sort of positive news from this deal and it appears to have got it with tariffs reduced to 10%, from 25%, for the first 100,000 cars, which covers the existing magnitude of exports but allows for little to no volume growth before higher tariffs would kick in. UK Steel is also set to be tariff free, with the UK and US moving in lockstep with its steel industries, but again the terms and conditions remain very light on detail. Meanwhile, pharmaceutical companies await more detail on any carve outs they have received, as the Trump administration finalises tariffs for that sector, but the UK has been promised preferential terms.
“Perhaps most controversially, the UK has promised to open up its markets to US agricultural products, including beef. Downing Street is keen to stress there will be no lowering of standards, but it does perhaps suggest the government was somewhat eager to strike a deal and may as a result have crossed some previous red lines.
“Overall, while we await the details it is clear the UK is in a better trade position with the US compared to yesterday, but things remain much worse than six months ago. This deal is an encouraging start in what is now expected to be a longer-term process to move to a more wide-ranging deal. However, it still leaves swathes of exports on higher tariffs than prior to liberation day, whilst UK farmers are unlikely to welcome the increased competition in the agricultural sector.
“With July 8th rapidly approaching and nearly 90 trade deals needing to be signed in that short period, it seems increasingly likely that reciprocal tariffs may partially return in some cases, risking retaliation. Whilst Donald Trump is keen to tout a ‘wide ranging deal’ this still leaves a meaningful burden of tariffs in place and will leave the UK hoping for a broader agreement with the EU. Whether that is still feasible following today remains to be seen.”
