May 9th 2025
US-UK trade deal: White Smoke?
Domestically this week looked set to be tough for the Prime Minister with his party losing 187 council seats and a humiliating by-election in Runcorn and Helsby to Reform UK last Thursday. While yesterday’s news of a new trade deal with the US will have offered him some, albeit limited, respite, his poor fortunes only continued when media attention interrupted the joint announcement with the President to cut to the Vatican and white smoke emerging from the Sistine Chapel.
The Prime Minister and his wider team have been upfront in their desire to reverse or at least mitigate the impact of Trump’s blanket 10% tariffs. With the US remaining the UK’s biggest trading partner, responsible for purchasing upwards of £200bn worth of British goods, Starmer and the Chancellor Rachel Reeves have been acutely aware of the importance of achieving this deal for the economy and their credibility.
Despite growing internal clamour to reverse policies such as the winter fuel payment cut and the rises to national insurance, Starmer can put his government’s work abroad down as a win. Indeed, while announcing the deal, Trump and his team were keen to heap praise on the UK saying he had an “external and internal bond” with the Prime Minister.
Building on the news earlier this week that he had achieved a new trade deal projected to be worth £4.8bn p.a. with India – something his Conservative predecessors failed to achieve – Starmer has ensured Britain has become the first country to break the US President’s protectionist front. Within Labour circles getting this deal over the line will go some way to keeping the wolves at bay and act as proof that the Government can deliver on their central mission, to achieve widespread economic growth.
Despite the initial positive discourse around achieving the deal, the devil, as always, ultimately lies in the detail. Going into these negotiations the UK was clear its priority lay in reducing Trump’s bumper tariff on steel, car and aluminium exports, while not giving up too much ground on agricultural standards, tech regulation and pharmaceuticals.
On the surface therefore, this initial framework looks to be a success. Starmer has negotiated down the 27.5% rate on cars to 10% (for the first 100,000 units) and abolished the 25% rate altogether on steel and aluminium, a move which will no doubt be welcomed by the 750,000 people employed in the automotive industry.
