Economists warn that tariffs will increase consumer prices. Will the US-UK trade deal help?
President Trump announces ‘tremendous’ UK trade deal
President Donald Trump announced a trade deal with the U.K., the first trade agreement since he imposed sweeping tariffs in April.
The U.S. and United Kingdom have signed a trade deal, the first such agreement since President Donald Trump announced sweeping tariffs on trading partners earlier this year.
The deal is set to lower tariffs on steel and automobiles and make it easier for the U.S. to export products like beef and ethanol to the U.K., according to a White House statement.
“This is now turning out to be, really, a great deal for both countries,” Trump said in the statement.
But for the average U.S. consumer worried tariffs will increase household prices, economists said the deal itself isn’t likely to offer much relief.
The U.S. has a $12 billion trade surplus with the United Kingdom, meaning it already exports more than it imports. Meanwhile, the baseline 10% tariff Trump announced April 2 will remain in effect for most U.K. imports, which could lead to higher prices for consumers.
The silver lining for inflation-weary consumers, according to Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics? This agreement could signal more trade deals on the horizon.
“For the average consumer, (the U.K. agreement) won’t be a big deal in itself,” he said. “But it could be a big deal because it signals a reversal of Trump’s extreme tariff agenda.”
How much does the US trade with the UK?
Despite being a major historical ally and trading partner, the United Kingdom ranks behind several countries in its share of U.S. international trade.
The countries Trump recently targeted with sweeping tariffs — China, Canada and Mexico — are the United States’ largest trading partners, providing nearly half of the foreign goods consumed in the U.S., according to a USA TODAY analysis of Census trade data.
Americans consumed $68 billion worth of goods produced in the United Kingdom in 2024, accounting for 2% of total U.S. imports from the world. At the same time, the U.S. shipped nearly $80 billion in products to the U.K., which is about 4% of total American exports worldwide.
According to a USA TODAY analysis of 2024 trade data, the top imported goods from the U.K. included cars and aircraft worth $14 billion, followed by machinery at about $13 billion and miscellaneous goods such as surgical devices, musical instruments and antiques totaling $12 billion.
Major U.S. exports to the U.K. included almost $15 billion in fuel, $13 billion in precious stones and jewelry, and $12 billion in aircraft and auto parts.
Top 5 U.S. imports from the U.K. in 2024:
- Transportation equipment (vehicles, aircraft, auto parts) – $14.2 billion
- Machinery – $12.9 billion
- Miscellaneous goods (medical equipment, musical instruments, arts and antiques) – $12.3 billion
- Chemicals (pharmaceuticals, fertilizers, cosmetics) – $12 billion
- Electronics & electrical machinery – $3.6 billion
Top 5 U.S. exports to the U.K. in 2024:
- Fuel (oil, gas) – $14.7 billion
- Stone & glass (precious stones, jewelry) – $13.3 billion
- Transportation equipment – $12 billion
- Miscellaneous goods – $9.4 billion
- Chemicals – $9.2 billion
Which industries benefit from this agreement?
Certain U.K. luxury automakers will benefit from the agreement, which cuts the 25% auto import tariff to 10% for the first 100,000 vehicles imported into the U.S. each year.
Trump said he made the exception to help high-end U.K. vehicles from brands like Rolls-Royce, Bentley and Jaguar, calling them “special” cars that are produced in limited quantities.
A news release said the U.K. will also be exempt from 25% steel and aluminum tariffs. Hufbauer said the change could help combat price increases among products from U.S. industries that use imported metal, such as construction, auto manufacturers and home appliances, although the U.S. imports a far larger share of steel from other countries. Canada, Brazil, Mexico, South Korea and Vietnam supplied nearly two-thirds of steel mill product imports in 2024, according to the American Iron and Steel Institute, a trade association.
Trade talks could also help keep pharmaceutical prices lower, according to Hufbauer. Chemicals – which includes pharmaceuticals – accounted for more than 17% of the U.K.’s exports to the U.S. in 2024.
Trump has promised “a major tariff on pharmaceuticals.” A news release from the United Kingdom’s government said “work will continue on the remaining sectors – such as pharmaceuticals and remaining reciprocal tariffs.”
Most imports from the U.K., though, will still get hit with a 10% tariff.
Consumers “got relief by not getting hit by further increases in tariffs,” said Desmond Lachman, senior fellow at the American Enterprise Institute, a conservative think tank. Still, “there are going to be a whole lot of goods coming from the U.K. that are going to cost 10% more.”
Are more trade deals on the horizon?
Lachman said the U.K. agreement could signal “bigger” deals on the horizon, such as talks with China.
Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer are set to meet China’s top economic official in Switzerland this week, a potential step toward de-escalating the trade war.
“That’s the one that’s key for the United States if you’re worried about the consumer,” Lachman said. “If they don’t get a deal with those people, a lot of the retails are warning that there’s going to be empty shelves, there’s going to be higher prices.”
China, which faces 145% tariffs on most goods, sent $438.9 billion worth of goods to the U.S. in 2024 compared to the U.K.’s $68 billion, according to Census Bureau data.
Long term, some economists worry the back-and-forth on tariffs could strain relationships between the U.S. and its trading partners.
“Trust is needed for any transaction. If you lose that, people will invest less. They’ll want to trade less,” said Peter Debaere, an international economist and professor at the University of Virginia’s Darden School of Business. “These are effects you will not see right away, but they are much more serious.”