The United States and the United Kingdom have announced a "breakthrough deal" that will establish an aluminium and steel trading zone and secure the pharmaceutical supply chain. This is the first trade agreement made by the U.S. since President Trump imposed a 10% tariff on most goods. The UK has also recently struck a free trade agreement with India.

Details of the US-UK Trade Agreement

The agreement affirms that "reciprocity and fairness is a vital principle of international trade" and increases access for U.S. agricultural products. While the final details are still being finalized, President Trump said the agreement would lead to increased beef and ethanol exports to the UK and streamline the processing of U.S. goods through customs. The White House estimates the deal will bring in $6 billion in external revenue from the existing 10% tariffs, which will remain in place, and create $5 billion in new export opportunities.

Under the agreement, the UK will lower its tariffs on U.S. goods from 5.1% to 1.8% and provide greater market access. Tariffs on UK steel and aluminium will be reduced to zero, and tariffs on up to 100,000 British cars will decrease from 27.5% to 10%. Any cars exported above that number will be subject to a 27.5% import tax. The agreement also establishes a reciprocal market for beef, with a quota of 13,000 metric tonnes for UK farmers.

The agreement also includes the following: * Commitments to enhance industrial and agricultural market access. * Closing loopholes and increasing the competitiveness of U.S. firms in the UK's procurement market. * Streamlined customs procedures for U.S. exports. * High standards for intellectual property, labor, and the environment. * Maximizing the competitiveness and securing the supply chain of U.S. aerospace manufacturers through preferential access to high-quality UK aerospace components.

Potential Impact and Reactions

British Prime Minister Keir Starmer stated the deal would boost trade and create jobs. The agreement is expected to protect British businesses and save thousands of jobs in the car and steel industries. The UK government also stated that the deal would not weaken UK food standards on imports.

Economists believe the immediate economic impact of the tariff deal will likely be limited, but trade agreements, in general, will help long-term growth. News of the agreement has been met with optimism from British lawmakers. U.K. Chancellor Rachel Reeves highlighted the strong trade and investment link between the U.K. and the U.S. and stated that the agreement is unlikely to impact ongoing talks between the U.K. and the E.U.

Implications for India

With the US and UK striking a trade deal, it could set the stage for countries like India seeking similar bilateral agreements. India is currently negotiating free trade agreements with various trading partners. President Trump stated that India agreed to drop all tariffs on U.S. imports, but New Delhi has not yet issued an official statement.