Context:

A forthcoming UK-US tariff agreement aims to reduce specific tariffs on goods such as cars, steel, and aluminium, although a blanket 10% tariff on most UK imports to the US will remain. While President Trump has declared it a major trade deal, the agreement is expected to be a narrow and temporary arrangement, with further negotiations required. The UK hopes to secure better terms for its major exports like cars and pharmaceuticals, but there is uncertainty about changes to tariffs on pharmaceuticals. A potential compromise could involve the UK lowering its digital services tax on US tech firms in exchange for reduced tariffs on certain exports. Despite possible reductions, UK food standards will not be compromised, aligning with EU regulations, and avoiding contentious issues like hormone-treated beef imports from the US.

Dive Deeper:

• The deal will not be a comprehensive free-trade agreement but rather a reduction in tariffs on certain UK exports to the US, amidst ongoing 10% tariffs on general imports.

• President Trump lacks the authority to sign a full trade agreement without congressional approval, meaning the current deal will involve exemptions or lowered tariffs on specific items rather than a new free-trade deal.

• The primary UK exports affected include cars and car parts, which currently face a 25% tariff, and the UK may negotiate either a tariff reduction or a quota system to facilitate exports.

• The steel and aluminium sectors are also significant, with existing 25% tariffs impacting around £2.2bn worth of UK exports, including products incorporating these materials, leading to concern over potential market disruptions.

• Pharmaceuticals are a major component of UK-US trade, though it remains unclear if or how the agreement will address tariffs on this sector, which could be a critical point given the large volume of trade involved.

• There is speculation that the UK might reduce its digital services tax on US tech companies as part of the negotiations, balancing revenue needs against political considerations related to President Trump's administration.

• Food standards, particularly concerning imports of hormone-treated beef and chlorinated chicken, will not be part of the deal, as the UK maintains alignment with EU standards and seeks a diplomatic balance with the US.