ECONOMYNEXT – The United States and the United Kingdom have reached a new tariff agreement, hailed by leaders as a historic breakthrough. However, while the deal offers some relief for key industries, it falls short of a full free-trade agreement and leaves a range of tariffs in place.
The agreement, announced by US President Donald Trump and UK Prime Minister Keir Starmer, reduces tariffs on British cars, steel, and aluminum entering the US.
The US has agreed to cut import taxes on British cars from 25% to 10%, benefiting luxury carmakers such as Jaguar Land Rover and Rolls Royce. Additionally, tariffs on steel and aluminum have been slashed, offering relief to UK manufacturers.
Certain tariffs, such as on pharmaceuticals and digital services, currently remain unchanged on US exports. Further, the agreement imposes a quota on British car exports. Only 100,000 vehicles per year will benefit from the reduced 10% tariff, while any exports beyond that will face a 25% import tax.
The deal also maintains a 10% duty on most British exports. While the agreement expands agricultural access for both nations, it does not significantly alter the broader trade relationship. Only the US Congress has the power to do so, a process that would take longer than the pause period.
This tariff update may shed light on the progress of Sri Lanka’s negotiations with the US government. Unlike the UK, Sri Lanka lacks the economic leverage to push for major tariff reductions. As such, the potential for relief may be correspondingly low.
Barring extension, the 90-day pause on reciprocal tariffs will end on July 8. Half the time has elapsed since the pause was implemented, with the UK’s announcement being the first so far. (Colombo/May9/2025)