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“The US Trade Deal Is a Bad Deal, and It Has the Potential to Get Worse”

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Yves here. The US is sensibly trying to cut trade deals first with countries that it perceives to be in a weak position so as to try to set benchmarks that can use to try to pressure others. So it should come as no surprise that the UK was head of the pack.

We pointed out during and after Brexit that the UK would be, erm, very eager to enter into a trade agreement with the US but it should be careful what it wished for. Smaller countries that enter into trade pacts with the US are terms takers, with only some negotiation at the margin for the purpose of face-saving. It’s not clear that even that nicety was observed here. Not only does this Administration relish dominance displays, but Keir Starmer is in a weak position generally and even more so after the Reform party romp in local council elections.

Richard Murphy provides the White House summary of the deal, and at least by comparing his take to a much longer write-up in the Financial Times, Murphy appears to have exaggerated some of the downside of the agreement (which I generally agree is pretty thin gruel for the UK). Specifically:

Murphy: “The protection of British agriculture and the quality of our food has been undermined.”

Financial Times: “UK negotiators avoided….making changes to UK food standards rules to allow products such as chlorine-washed chicken and hormone-treated beef.”

Now that does not mean US cattle farmers have not gotten advantage compared to their UK counterparts, but it does not appear that food safety, as defined by the UK, has been compromised. However, the devil is in the details, and a lax enforcement/labeling regime could wind up permitting some non-compliant products to get through. And the Financial Times suggests that the break on US ethanol would most assuredly hurt UK producers.

But the main points still stand out:

The US looks is trying to stick to a baseline of 10% tariffs. For instance that the ballyhooed break for up to 100,000 UK cars (just a smidge below the US export total last year) took the tariffs from 27.5% to 10%. That translates into a lot of hurt for US consumers and businesses, particularly small businesses.

The fact that the 100,000 UK cars is the flagship for this agreements also shows the UK gave great priority to preserving jobs at its luxury carmakers (who also make other goods for US buyers like aircraft engine parts)

Some parts of the UK deal seem peculiar. Getting a waiver for aluminum? When aluminum is so energy-intensive that it is often called “solid electricity” and the UK and Europe have sanctioned themselves into high energy costs? But it appears that the waiver on steel and aluminum it to prevent double-tariffing on the afore-mentioned aircraft parts.

The pink paper concurs with Murphy’s downbeat assessment:

Mattia Di Ubaldo, principal research fellow in international trade at the University of Sussex, said the deal left the UK in “a significantly worse position” in its bilateral trade terms with the US than a year ago — but now with a competitive advantage against some other countries….

Economists said the deal would bring relief to the industries at greatest risk from tariffs, but would make no difference to the overall economic outlook in either the US or the UK. They suggested the US would also struggle to strike meaningful deals with other countries.

The limited relief from auto and steel and aluminium tariffs would “nibble away” at the US effective tariff rate, but the average tariff was still set to remain in double digits, hitting American consumers hard, said Michael Pearce at the consultancy Oxford Economics…

Paul Dales, UK economist at Capital Economics, said the effective US import tariff rate on the UK would stand at about 11 per cent as a result of the arrangement, far higher than the 1 per cent that existed last year. That was an improvement on the 13 per cent that preceded Thursday’s agreement, but much depended on future US measures on critical sectors such as pharmaceuticals.

The results are underwhelming from a US vantage too:


By Richard Murphy, Professor of Accounting Practice at Sheffield University Management School and a director of the Corporate Accountability Network. Originally published at Funding the Future

This statement was issued by the White House yesterday on the UK/US trade deal, about which a great deal of uncertainty remains:

  • President Trump: “The deal includes billions of dollars of increased market access for American exports, especially in agriculture, dramatically increasing access for American beef, ethanol, and virtually all of the products produced by our great farmers.”
    • “The UK will reduce or eliminate numerous non-tariff barriers that unfairly discriminated against American products.”
    • “This is now turning out to be, really, a great deal for both countries.”
  • Prime Minister Starmer: “This is going to boost trade between and across our countries. It’s going to not only protect jobs, but create jobs, opening market access.”
  • This trade deal will significantly expand U.S. market access in the UK, creating a $5 billion opportunity for new exports for U.S. farmers, ranchers, and producers.
    • This includes more than $700 million in ethanol exports and $250 million in other agricultural products, like beef.
    • It commits the countries to work together to enhance industrial and agricultural market access.
    • It closes loopholes and increases U.S. firms’ competitiveness in the UK’s procurement market.
    • It ensures streamlined customs procedures for U.S. exports.
    • It establishes high standard commitments in the areas of intellectual property, labor, and environment.
    • It maximizes the competitiveness and secures the supply chain of U.S. aerospace manufacturers through preferential access to high-quality UK aerospace components.
    • It creates a secure supply chain for pharmaceutical products.
  • The reciprocal tariff rate of 10%, as originally announced on Liberation Day, is in effect.
  • The United States will agree to an alternative arrangement for the Section 232 tariffs on UK autos.
    • Under 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.
  • 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.
  • This U.S.-UK trade deal will usher in a golden age of new opportunity for U.S. exporters and level the playing fields for American producers.

What does all this mean? The honest answer is, who knows?

What we do know is:

  • The 10 per cent tariff Trump imposed in April remains in place
  • Tariffs are reduced on steel, aluminium and cars.
  • The UK has to accept US beef, ethanol and other products.
  • We may have increased US access to the NHS and other public services.

So, we can conclude:

  • The UK gave away a lot to avoid a threat of tariffs on British-made luxury cars.
  • So far, we have avoided giving away Digital Services Tax revenues, but it seems likely that is still on the table.
  • It is likely that the competitive position of UK-based suppliers to the UK government has been harmed.
  • The protection of British agriculture and the quality of our food has been undermined.

And all that to leave us in a worse position than we were in on 1 April.

If this is what a good deal looks like, I suggest someone should tell Starmer that sometimes (by which I mean, usually, or even always) no deal is better than a bad deal, because that is what he’s got.

Last July, my most basic hope was that Starmer might arrest the decline in the quality of British Prime Ministers. I now realise my hope was misplaced. Starmer now ranks alongside Johnson for incompetence. He may not have challenged Truss as yet. But, give him time. Things are definitely getting worse.

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38 comments

  1. Carolinian

    I’m trying to think of some product around my house that comes from the UK and can’t come up with a thing–except those many movies of course. I linked this the other day which is a tariff plan that Jon Voight journey to Mar a Lago to give to Trump.

    https://deadline.com/2025/05/jon-voight-hollywood-plan-read-in-full-trump-tariffs-1236387042/

    the Midnight Cowboy star seeks a 10%-20% federal tax credit that would be “stackable” on what states like California (which takes a drubbing in Voight’s document), Georgia and New York already provide. On the flip side, there’s a hammer that will come down. If a U.S.-based production “could have been produced in the U.S., but the producer elects to produce in a foreign country and receives a production tax incentive therefor, a tariff will be placed on that production equal to 120% of the value of the foreign incentive received,” the proposal given to Trump exclaims

    And unlike other industries the US already has a Dream Factory built and waiting on the West Coast. Of course it’s one that will demand generous tax subsidies but that’s taken care of with the upcoming Walmart tax or so Trump thinks. The voters may have something to say.

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      1. Michaelmas

        Some figures for context would help here —

        In 2023, the UK earned £470 billion from services exports, or $628 billion.

        And in the 12 months preceding February 2025, total UK exports of both goods and services was £1,790.5 billion, or $2,381 billion, making the UK the world’s fourth largest exporter according to one estimate, or fifth after France according to another — either way France and the UK are close.

        https://www.statista.com/statistics/1312780/trade-in-services-exports-uk-by-service/
        https://www.gov.uk/government/statistics/uk-trade-in-numbers/uk-trade-in-numbers-web-version

        For comparison’s sake, the US’s population in 2024 was 342 billion, while UK population was 68.5 billion, making the US population over five times larger. So the UK is proportionally way more into services exports (though it’s not the post-industrial washout at manufacturing and goods exports that one assumes — I certainly did — before one looks at the figures).

        And that’s the context in which this deal — or hostage negotiation — with Trump can possibly be seen in. The UK government doesn’t want Trump to pay attention to UK services exports to the US and to get it into his little mind to go after them, so they’re giving him this.

        Also, the UK is the top foreign investor in the US at $2,946 trillion (see Schedule B here) —
        https://home.treasury.gov/news/press-releases/sb0124

        And the top three foreign holders of US treasuries are (Schedule A, same page) —

        [1.] Japan – $1.06 trillion
        [2.] China – around $759 billion
        [3.] UK – $641 billion
        https://home.treasury.gov/news/press-releases/sb0124

        2,946

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        1. Ludus57

          A UK population of 68.5 billion in 2024?
          No wonder my local pub seemed busier than usual last night!

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    2. Polar Socialist

      The only UK products I can see in my dwelling are Auchenstoshan, GlenAllachie, Port Charlotte and I think there’s some Talisker in the kitchen cabinet, too. Oh, and the Quicksilver by Neal Stephenson on my side desk seems to be printed in Great Britain (Arrow Books).

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        1. KLG

          I buy many books from Blackwell’s. Great service and reasonable prices. No VAT and free shipping. Slower than Amazon but not evil. And books printed and bound in Great Britain are often much better than the US editions.

          We have also had two MINI Coopers. Assembled in Oxford but mostly BMW under the hood. The first was totaled by a very large deer who appeared out of the dark rain and the other by a big-ass American Pick ’em Up truck who made a left turn over the left front of the car. Great cars and fun to drive but no one to work on them in this burgh anymore. Replacements were both Japanese products that will last longer than either of us if we change the oil.

          Anyway, I guess that Aston Martin I have my eye on will cost more…

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    3. thousand points of green

      I have a Haws watering can and a garden spade and a strapped D-handled digging fork from UK ( specifically, from England itself.).

      I think some of the books I have were printed in UK.

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    4. scott s.

      UK bicycle retailers have had a large presence in the US online market, but most all of that originates in Asia. But the “big two” (Shimano and SRAM) got wise that US consumers were using the UK to avoid artificially high MSRP on components in the US market and threatened to cut them off if they sold to the US. So all we can do now is sigh when looking at the prices on their websites.

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      1. JD

        Chinese bike component companies are getting better and better. Plus they sell at quite a discount to the big two. I am not a commited cyclist, but if I wanted to replace my Shimano I’d be looking East.

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    5. ChrisFromGA

      The last decent thing we got out of the UK were the bands Genesis and Dire Straits, and that was 45-50 years ago.

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      2. Clark T

        Let’s not leave out Richard Thompson (and ex-wife Linda) and Robyn Hitchcock (the latter has lived in Nashville for a few years now).

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    6. Emma

      I guess we’ll be paying a little bit more for Scotch whisky. Good luck making that in North America!

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      1. RonaldM

        Cadbury Creme Eggs are produced differently in the United States and the United Kingdom. The American version is made by The Hershey Company, while the British version is produced by Cadbury UK, which is owned by Mondalez International, aka Kraft Foods, which itself was a spin-off from Philip Morris Companies (now known as Altria Group). Mondelez International is headquartered in Deerfield, Illinois, USA.

        It’s the US butter and beef that I as a Brit will avoid like the plague. Sadly, Google, F’book, Apple and other American sources of evil along with death can’t be avoided, but hey-ho, at least we pronounce ‘oregano’ right.

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  2. t

    There are plenty of UK biscuits in my house – although they may have been made in America. And my tack trunk has plenty of UK goods, and not all of them bought used! Some absolutely were shipped from the UK. Saddle fitters from the UK make US trips once or twice a year – or they did. Some people who buy custom-made saddles may not blink at higher customs. We shall see. Poor Ann Romney!

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  3. Neutrino

    Chlorine-washed chicken and sketchy beef, to be avoided by us in the US and the UK!
    Add in the tumors, bloody meats and other unappetizing displays at your grocer’s meat and poultry section.

    How many US cars would be exported to the UK? Can’t see that as a very big number.

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    1. TimH

      I’m waiting for the UK to adjust it’s country-of-origin regs so that a shopper can’t tell that they are buying US chicken and beef. That will be easier to do for processed foods (burgers, nuggets) than for slabs of flesh in Sainsbury’s.

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    2. Victor Sciamarelli

      The problem with US beef is not just the growth hormones and antibiotics but the fact that the US imports live cattle and beef products from 16 countries, especially from Mexico and Canada. It also exports beef.
      It’s unlikely that Americans know where their beef comes from. Europeans ban American beef imports due to the use of hormones but also because it’s hard to know if the so-called American beef originated in the US, Nicaragua, Brazil, Australia, Mexico or some other country.

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      1. Danco

        Listening to a current affairs comedy on Radio 4, the ‘serious ‘ radio station in the UK last night. One of the comedians said it was all a matter of perception regarding beef, think hormone ‘infused’ with a chlorine ‘marinade’ instead..

        Another wondered why an armoured pope mobile/health vehicle was needed? Surely no one would attack an ambulance, or hospital, or doctors or children?/s

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  4. vao

    “They suggested the US would also struggle to strike meaningful deals with other countries.”

    Since Brexit, the UK has also been trying to strike trade deals with other countries to replace the agreements the EU had which it cannot grandfather. Could the arrangement with the USA set a precedent for the conditions that other countries may wish to impose on the UK in the context of such trade agreements? Or does the Starmer-Trump deal embody too many idiosynchrasies of the import/export flows of the USA to be relevant anywhere else?

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  5. i just don't like the gravy

    Now that does not mean UK cattle farmers have not gotten advantage compared to their UK counterparts

    Minor typo makes it confusing b/t US or UK.

    Thanks for the coverage as always Yves.

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  6. TiPi

    “The protection of British agriculture and the quality of our food has been undermined.”

    Yes … but not by this deal ….. which is trivial in terms of the problems facing UK farmers.

    Since Brexit there has been no coherent comparable farm payments system as Gove, then the Tory minister overseeing the post Brexit setup, decided to review the system such that there was no coverage of basic production costs, only ‘added value” environmental schemes would be eligible, and that set of schemes is in a mess. The result is continued uncertainty for famers, and frequently delayed payments anyway.

    In England cereals production was almost halved last year due to bad weather, and flooding of a lot of Grade 1 and 2 arable land.

    Then we have the main supermarkets acting collectively with virtual monopsony driving farm gate prices lower – some milk contracts have consistently been below production costs and the UK dairy industry has been in decline for the best part of 20 years, with farmers still ceasing milk production entirely .
    The average farm payment in Scotland comprised 70% of farm profits a couple of years ago. The returns from actual production of food was only 30% of farm revenues.

    Then Labour have messed with the farm inheritance tax regime, creating further chaos, and massive resentment. as they set the thresholds too low. Farmers do still get a positive benefit from intergenerational farm handovers in lower death taxes, if they are planned ahead, but the sum of £37,500 pa as inheritance tax due is actually higher than the average farm revenue (after costs), so hits the smaller farmers hardest. The average age of UK farmers is about 60 yrs old, and many don’t have sons and daughters wanting to take over.

    As farm land prices are unrealistically high, and have been subject to massive speculation and price hikes per acre, often due to speculative private equity schemes and financialisation of agricultural land markets, the whole matter of land values is crazily distorted. There is little possiblity of new entrants into the industry with this level of upfront capital required.

    So the matter of a fairly insignificant trade deal, which doesn’t even touch the two main UK exports of farmed salmon and whisky, is .. err.. small beer.

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    1. Michaelmas

      TiPi: Labour have messed with the farm inheritance tax regime

      The most logical explanation for those farm inheritance tax changes is that Starmer’s Labour wants to drive those family farms out of business so as to sell them to big agricultural interests owned by the likes of Black Rock (and get the personal kickbacks therefrom).

      This may be attributing to malice what’s more easily explained by sheer incompetence. But it’s hard to tell with Starmer’s Labour.

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      1. Revenant

        Yes, this treaty is Irrelevant to UK farmers – and I hope to UK food consumers. But to amplify TiPi: so, I have the farm up for sale and who are two most interested parties? To my horror, forestry companies spending public money (grants and biodiversity etc subsidies) to acquire farmland for tree-planting. Ridiculous!

        1) British tree cover ratios have been stable for a thousand years (see the work of Oliver Rackham). We don’t need forests, especially non-native conifers, we need food.

        2) this is being driven top-down by targets in the UK land use plan developed by this and previous governments. Grade 3 and 4 land is being targeted, which means the prettiest and most visible, most distinctive rolling hills of wooded pasture in Devon, which are Bronze Age clearances. There is minimal Grade 1 land in the southwest and not much Grade 2 because those are arable considerations; the poor steep land here is all permanent pasture, much if it ancient ecosystems supporting interface habits (hedges, field margins, tree margins, scrub) .

        3) Nobody has thought this through – beyond trees are good but don’t plant trees on good arable land – and they will be surprised when a generation if farmers retires and the landscape is full of commercial forestry. All of these tree and biodiversity net gain schemes are being run without coordination with the farming support schemes (which themselves have environmental goals but which treat farmers as land managers rather than eco-corporations and green investment funds)

        The eco-nutters have been allowed to set foundational policies that the general public is only just waking up to: unreliably and vastly overpriced energy, undemocratic changes in land use, impossible building regulations – while real environmental conservancy (of rare habitats) is bring thrown out the window in a dash for growth and housebuilding.

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    1. Michaelmas

      He’s obviously correct. It’s basic game theory, though he puts it over with admirable clarity.

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  9. Patrick Donnelly

    Trumpian Rifts!

    Aggression to ‘Allies’ who meekly accept …. whatever the real deal will be, while the real targets are supposed to cower and beg for a deal.

    Not having wasted my time reading “The Art of The Deal”, I assume that deception is key to Donald, the Launderer?

    Follow the really big sums of money?

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  10. eg

    Starmer is the very definition of an empty suit. As one of his own people put it so brilliantly, “Keir’s not driving the train. He thinks he’s driving the train, but we’ve sat him at the front of the DLR.”

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