On Thursday, U.S. and UK officials held a press conference on a new trade deal, and issued some press releases, remarks, and fact sheets, as well as a "General Terms for the United States of America and the United Kingdom of Great Britain and Northern Ireland Economic Prosperity Deal" (EPD) document that provides additional details.
It's not clear how long it will take to get to a final version of the deal or to release a full legal text that is in effect. On the timing, the General Terms document states: "The United States and United Kingdom are immediately beginning negotiations of the EPD to develop and formalize the proposals made in this document." And on the legal effect, while the General Terms states that "[t]his document becomes operative on May 8, 2025," it also says "[b]oth the United States and the United Kingdom recognize that this document does not constitute a legally binding agreement."
Regardless of all that uncertainty, we have a few details of what is in, or is likely to be in, the deal, so let's take a look. When the U.S. pushed the UK into a trade negotiation by imposing the IEEPA tariffs, alongside the Section 232 steel/aluminum and auto tariffs, what was the result?
IEEPA tariff remains
A White House fact sheet states: "The reciprocal tariff rate of 10%, as originally announced on Liberation Day, is in effect." That's a big deal, with the UK conceding on a major point. With this tariff still in effect, UK exports are much worse off than they were prior to April 2.
If a deal on these terms looks unbalanced, can the UK government fight off criticisms that it got bullied into making too many concessions? Based on their press release, I can see how they are trying to spin this as a win. But it can be hard for governments to control these narratives. To some extent, the perception in the UK may depend on what other governments do in their own negotiations. If I understand the stated Trump administration position, the best that countries can hope for with regard to the "Liberation Day" tariffs is to end up with a 10% tariff. We'll see if that holds, but regardless I am interested in seeing (1) how each country will handle this in the negotiations, and (2) how the results play politically in different countries, especially when these countries start comparing their negotiating results.
Autos
On autos, the UK was able to get a TRQ under which most of its usual quantity of exports can be imported at a rate of 10%. The White House fact sheet says: "The United States will agree to an alternative arrangement for the Section 232 tariffs on UK autos." In this regard, "[u]nder the deal, the first 100,000 vehicles imported into the U.S. by UK car manufacturers each year are subject to the reciprocal rate of 10% and any additional vehicles each year are subject to 25% rates." And the General Terms document explains that: "The United States will create a quota of 100,000 vehicles for UK automotive imports at a 10 percent tariff rate, and an accompanying arrangement for attendant auto parts for such autos." The UK press release adds some more details: "Car export tariffs will reduce from 27.5% to 10% - saving hundreds of millions a year for Jaguar Land Rover alone. This will apply to a quota of 100,000 UK cars, almost the total the UK exported last year."
Most UK auto exports to the U.S. are items I can't afford: Rolls Royce, Aston Martin, and Bentley, and something described as "McLaren supercars." While this tariff adjustment doesn't help me or most Americans, these UK producers are not in as bad a place as they were with the full Section 232 tariffs, although of course they are worse off than before the Section 232 tariffs.
Beef and Ethanol
Agriculture is always a big issue for farm state members of Congress (many of whom are Republicans), and my sense is some of them have been holding off criticism of the Trump tariffs in the hopes that they will get something out of these negotiations. On agriculture, the White House fact sheet says: "This trade deal will significantly expand U.S. market access in the UK, ... [including] more than $700 million in ethanol exports and $250 million in other agricultural products, like beef."
Starting with beef, the General Terms says:
U.S. beef exports to the United Kingdom are currently subject to a 20 percent tariff within a quota of 1,000 metric tons (mt). The United Kingdom will remove the 20 percent tariff. Additionally, the United Kingdom will create a preferential duty-free quota of 13,000 mt for U.S. beef. In return, the United States will reallocate to the United Kingdom 13,000 mt of its existing “Other Countries” tariff rate quota (TRQ) for beef.
This UK market opening helps U.S. producers out a little bit, although of course what they really want is to be able to sell hormone-treated beef in the UK. The UK press release appears to shoot this down: "There will be no weakening of UK food standards on imports." On this issue, hormone-treated beef (and chlorine-washed chicken) came up in a question at the press conference, and US Trade Rep. Greer answered:
I would just say that it's very clear, and we have in the [General Terms], that we are going to discuss all of these types of issues, and obviously the importing country, whether it's us or them, you gotta follow the rules on those types of things. But our point is the rules need to make sure that they are based on science, and that's our expectation. We know the UK believes that too. So we want to come to an accommodation. We want the consumers in each country to be able to choose what they want and give them the information.
My interpretation of his answer is that the same sorts of international SPS rules used in the past will be relied on here, rather than the UK immediately opening its market to these products. For what it's worth, the General Terms has the following to say on this subject:
The United Kingdom and the United States plan to work constructively in an effort to enhance agricultural market access. Further, both countries positively support future discussions to strengthen bilateral agricultural trade. The United Kingdom and the United States affirm that imported food and agricultural goods must comply with the importing country’s sanitary and phytosanitary (SPS) standards and other mutually agreed standards. The United Kingdom and the United States commit to working together to improve market access for agricultural products, to highlight concerns, and to increase agricultural cooperation on areas such as certain export verification programs to facilitate greater trade, and more formal bilateral engagement through international standard setting bodies.
Putting all of this together, my view on whether U.S. producers will get what they want in terms of selling these controversial products remains the same as it has always been: It's not going to happen. If I were these producers, I would focus on pushing for better market access for their non-hormone-treated/chlorinated products.
On UK exports of beef to the U.S., the UK press release states: "In a win for both nations, we have agreed new reciprocal market access on beef – with UK farmers given a quota for 13,000 metric tonnes." And the General Terms says: "the United States will reallocate to the United Kingdom 13,000 mt of its existing 'Other Countries' tariff rate quota (TRQ) for beef." But note that it is only recently that UK beef exports to the U.S. have resumed, after the mad cow scare of a couple decades ago, and there has been a small amount of exports over the last few years. When I talk about this with trade lawyers who work on beef trade issues, they have a hard time seeing UK beef exports growing much.
And on ethanol, the General Terms says: "the United Kingdom will offer a preferential duty-free TRQ of 1.4 billion liters for U.S. ethanol." The UK press release states: "We will also remove the tariff on ethanol – which is widely used in our manufacturing sector - coming into the UK from the US, down to zero." In terms of the practical impact here, an agriculture expert noted the following on this issue: "The U.S. exported $535 million in ethanol to the U.K. in 2024, according to USDA data, making ethanol the top agricultural export product to the U.K. As the industry touted the news, representatives in the ethanol industry were looking for more details about how the White House came up with the $700 million figure."
Steel
Turning to steel, there are some potentially interesting things here. The UK seems to have mostly gotten out of the Section 232 tariffs. The UK press release states: "The UK steel industry – which was on the brink of collapse just weeks ago – will no longer face tariffs thanks to today’s deal. The Prime Minister negotiated the 25% tariff down to zero, meaning UK steelmakers can carry on exporting to the US. This follows last month’s intervention from the Prime Minister to take control of British Steel to save thousands of jobs in Scunthorpe."
The White House fact sheet adds some detail:
- The United States also recognizes the economic security measures taken by the UK to combat global steel excess capacity and will negotiate an alternative arrangement to the Section 232 tariffs on steel and aluminum.
- This deal creates a new trading union for steel and aluminum.
What will this "trading union" mean exactly? The Biden administration was trying to negotiate something on green and non-market steel and aluminum with various trading partners. I'm not sure Trump will care about green, but there could be some overlap here with what the Biden administration was doing. The General Terms adds a bit more context:
The United Kingdom will work to promptly meet U.S. requirements on the security of the supply chains of steel and aluminum products intended for export to the United States and on the nature of ownership of relevant production facilities. Understanding the United Kingdom will meet these requirements, the United States will promptly construct a quota at most favored nation (MFN) rates for UK steel and aluminum and certain derivative steel and aluminum products.
The full details of this arrangement are hard to pin down at this point, but an FT piece had some insights:
The UK has accepted strict US security “requirements” for its steel and pharmaceutical industries, in what diplomats see as template that Washington could use to exclude China from other countries’ strategic supply chains.
Thursday’s trade deal offered tariff relief to both industries, but only on the condition that Britain “work to promptly meet US requirements” on their supply chain security and the “ownership of relevant production facilities”.
UK officials said the provision applied to all third countries, but acknowledged that Trump had signalled that China was the intended target.
As industry groups sought to clarify the nature of the US requirements on supply chain security and ownership, trade experts argued that the deal indicated that the Trump administration was stepping up long-standing demands to restrict Chinese inputs to strategically important goods.... Britain’s Labour government has rejected as “complete nonsense” accusations by the opposition Conservatives that this week’s deal, which also offers tariff relief for UK aluminium, hands Washington a “veto” over supply chains. “There is no such thing as a veto on Chinese investment in this trade deal, this is not what this trade deal is about,” Darren Jones, Treasury chief secretary, told Times Radio.
One British official said: “The US do not want, given that the UK will have much lower tariffs than the rest of the world, to become somewhere where countries or companies could circumvent their rules via UK exports to the US. Details of that will be worked through.”
It seems likely that whatever the details are here, they will be a model the U.S. uses for the other trade deals being negotiated.
Airplanes
An adjacent element (i.e., not in the text) mentioned at the press conference was that a British airline would buy $10 billion of airplanes from Boeing. News reports later indicated that IAG was placing a "new order for 32 Boeing 787-10 aircraft for British Airways, and 21 Airbus A330-900neo aircraft," while also disclosing "options exercised in March for six Airbus A350-900s, as well as six Airbus A350-1000s and six Boeing 777-9s." Is this IAG order different from what would have happened without the deal? Did Boeing get more than it otherwise would have?
The White House fact sheet also talks about how the deal "maximizes the competitiveness and secures the supply chain of U.S. aerospace manufacturers through preferential access to high-quality UK aerospace components." At the press conference, Commerce Secretary Howard Lutnick talked about letting "Rolls Royce engines and those kind of plane parts ... come over tariff free."
Issues to be negotiated: Digital, future Section 232 tariffs, compliance, review, MFN/WTO
The official documents make clear that there is still a lot to be worked out.
On digital, I can imagine something fairly significant will come out of this. The UK press release says: "The Digital Services Tax remains unchanged as part of today’s deal. Instead the two nations have agreed to work on a digital trade deal that will strip back paperwork for British firms trying to export to the US – opening the UK up to a huge market that will put rocket boosters on the UK economy." And the General Terms states: "Both countries confirm that they will negotiate an ambitious set of digital trade provisions that will include within its scope services, including financial services."
At the same time, the USTR fact sheet has a complaint about digital services taxes: "The United States is disappointed that the UK was unwilling to agree to fully address its discriminatory Digital Services Tax (DST). It is discriminatory, unjustified, and should be removed promptly."
So what does all this mean? Are digital services taxes still in play? Will there be a tech friendly deal with provisions that, at least on their face, constrain domestic regulation? Will such a deal be enforceable? Will it have an actual impact on UK regulation in this area?
The UK also seems hopeful it has shielded itself from future Section 232 tariffs (like this new investigation on aircraft and jet engines). Its press release says: "the US has agreed that the UK will get preferential treatment in any further tariffs imposed as part of Section 232 investigations." How will this commitment be worded in the final legal text? Will the UK really get what it is hoping for? The General Terms adds the following detail:
In addition to products already addressed in this document, the United States and the United Kingdom intend to adopt a structured, negotiated approach to other sectors that may be subject to Section 232 investigations or other tariff measures with a view to a significantly preferential outcome. Any such approach is contingent on the United Kingdom ensuring the security of supply chains, using appropriate measures, of products intended for export to the United States and on the findings of related U.S. investigations of, or other tariff measures related to, such sectors.
Another issue is whether this deal will actually be upheld, and what happens if it is not. Will there be a dispute settlement mechanism to adjudicate disagreements on compliance? Based on the General Terms, I suspect there will not be. All I see is a basic provision allowing for consultations, which I suppose could be used in the situation where there is a dispute over compliance:
The United Kingdom and the United States recognize that the purpose of this arrangement is to deepen our trade relationship based on mutual trust and a shared commitment to fair and reciprocal trade. On request of either country, the United Kingdom and the United States will consult with a view to considering any changes that may need to be made to this arrangement to ensure that it remains mutually beneficial.
So what happens if one side takes an action that the other side believes is not consistent with the terms of the deal? How does each side expect this scenario to play out? It would be useful to get on the same page about this now.
Somewhat relatedly, how durable will the specific terms of this agreement be? The General Terms says: "The United Kingdom and the United States further plan to discuss procedures for review and termination as part of the negotiations of the EPD." This raises the possibility that the U.S. might push for something like the USMCA six year review/extension process, potentially leading to regular renegotiations of the terms, in order to get to a certain result. What would the UK think of that possibility?
And finally, another big systemic issue is the following: Will the tariff lowering take place in a way that can be justified under WTO rules? That's a big one for anyone who cares about a rules-based trading system. The preferential beef and ethanol TRQs noted above are relevant here, as is the following from the General Terms:
Following a reasonable period of negotiation: (i) the United Kingdom intends to reduce its applied tariff rates on a preferential basis on a range of originating goods of the United States in sectors of importance to the United States; and (ii) the United States intends to reduce its applied tariff rates on a preferential basis on a range of originating goods of the United Kingdom in sectors of importance to the United Kingdom.
It seems clear from this language that tariff lowering will not be done on an MFN basis. Could it be justified under Article XXIV? While there may be some disagreement on what constitutes the "substantially all trade" that is required to comply with Article XXIV, the trade covered by the EPD does not seem likely to reach that level. While the WTO Committee on Regional Trade Agreements has not served as an effective check on what happens in bilateral and regional trade agreements, there is the possibility of using WTO dispute settlement here. If other governments see that their producers are at a disadvantage as a result of the preferential tariff lowering, would they file a WTO complaint?
