• The US and UK have agreed on a non-binding Economic Prosperity Deal (EPD), a framework for future trade relations.
  • The initial agreement lowers some tariffs on cars and agricultural goods but maintains a 25% levy on UK steel and aluminum.
  • President Trump stated the UK would like to 'refine' the deal, signaling ongoing negotiations with a potential September deadline for a final agreement.

A Framework, Not a Final Deal

President Donald Trump and UK Prime Minister Keir Starmer have unveiled the broad strokes of a trade pact, but the President's recent comments confirm that the hard work of finalizing a binding agreement is just beginning. The so-called Economic Prosperity Deal, announced on May 8, serves as a statement of intent rather than a conclusive treaty, with key sectors still subject to tough negotiations and existing tariffs.

On June 16, President Trump moved to implement select provisions of the EPD via executive order, primarily affecting automotive tariffs and aerospace parts. However, the 25% tariff on UK steel and aluminum imports, a major point of contention, remains firmly in place. People familiar with the matter suggest the administration is using these tariffs as leverage, warning that the UK’s exemption could be revoked if a final deal is not cemented.

Sectoral Wins and Losses

The preliminary understanding offers a mixed bag for both economies. UK automakers have secured a significant win with reduced barriers for exporting to the US market. In return, the UK has agreed to remove retaliatory tariffs on American beef and offer increased quotas for tariff-free US beef and ethanol, a boon for US agricultural exporters. Notably, UK aerospace exports, such as jet engines, have been spared from new US tariffs.

Yet, the persistence of the steel and aluminum tariffs underscores the deal's fragility. Industry groups on both sides of the Atlantic have expressed cautious optimism laced with concern, wary of the uncertainty surrounding the final terms. The deal comes against a backdrop of heightened global trade tensions, following Trump’s April 2 “Liberation Day” proclamation that imposed a general 10% “reciprocal tariff” on all countries.

A Road Paved with Legal Challenges

Complicating the path to a final agreement are ongoing legal challenges in US courts. Recent rulings have struck down some of the administration’s tariff actions, questioning their authority under the International Emergency Economic Powers Act (IEEPA). This legal uncertainty could force the Trump administration to revisit or renegotiate parts of the EPD, depending on how the issue of executive tariff authority is ultimately resolved.

The administration has suggested a deadline for finalizing the full agreement could extend into September 2025. For now, the EPD stands as the first significant US-UK trade framework since Brexit, illustrating a significant recalibration of the special relationship amid a wider shift towards bilateral, protectionist deals.