Tariffs of 10% at the very minimum could be the best deal other countries and trading blocs will achieve, according to analysts.Tariffs of 10% at the very minimum could be the best deal other countries and trading blocs will achieve, according to analysts.
The U.K. and U.S. agreed to a landmark trade deal on Thursday — yet the agreement appears to be far from free of tariffs.
The deal is the first made by the United States since President Donald Trump unveiled his so-called reciprocal tariffs on countries around the world last month.
The United Kingdom’s position as one of a handful of countries where the U.S. boasts a trade surplus in goods — meaning the U.S. exports more to the U.K. than it imports — put the country at the front of the queue for officials to broker an agreement with the Trump administration.
However, even Britain, with its “special relationship” with the U.S., didn’t manage to persuade Trump to drop all tariffs during trade talks.
Under the deal, the U.K. can export 100,000 vehicles each year at a 10% rate, with any additional vehicles facing 25% duties. British steelmakers and the aluminum industry will be able to export tariff-free, down from the 25% rate that the U.S. imposed in February.
However, all other goods imported to the U.S. from the U.K. will still be subject to a 10% baseline tariff — which Trump says is the lowest country-specific tariff that will be applied to trading partners.
Trump also suggested the deal is likely to be rare due to the two countries’ balanced trading relationship and close political ties — meaning it’s unlikely any country will be tariff-free under his second administration.
Asked if the 10% baseline tariff is a template for future trade deals, Trump said: “That’s a low number.”
“They made a good deal,” he added. “Some will be much higher because they have massive trade surpluses.”
Analysts took that to mean that tariffs of 10% at the very minimum are the best deal other countries and trading blocs could achieve.
“The details of the US-UK deal suggest that the US 10% baseline tariff is likely to remain in place for other trading partners with virtually no exceptions, but signals more flexibility than expected on sectoral tariffs,” said Jan Hatzius, chief economist and head of global investment research at Goldman Sachs.
JPMorgan’s U.S. Economist Abiel Reinhart also noted that “the chances that a rate of at least 10% on most goods across most countries could be maintained this year,” in a note to clients.
However, Reinhart pointed out that the carve-outs the United Kingdom secured for its auto, steel and aluminum sectors indicated the U.S. may be willing to cut bespoke — yet narrower in scope — deals with other nations.
“This has been a key sticking point in recent trade discussions with Japan, given the importance of its auto sector,” Reinhart added “But it’s also possible that the US was more willing to make concessions with the UK on autos given that the UK only accounts for about 2.5% of US imports of vehicles and parts. By contrast, Japan accounts for close to 12%.”
