Urgent Call for Swift Resolution of Tariff Uncertainty in Steel Sector
The UK and US have sealed a significant trade deal, known as the Economic Prosperity Deal (EPD), which came into effect on Monday. This agreement, signed at the G7 summit earlier this month, is set to bring about changes in various sectors, particularly automotive, steel, aerospace, agriculture, and more.
In the automotive sector, UK-origin vehicles can now enter the US market at a reduced 10% tariff, down from the previous 25%. This quota, allowing up to 100,000 UK-made cars annually, is contingent on UK automakers meeting US supply chain security standards.
The steel and aluminum industries stand to benefit from the deal as well. The framework sets the stage for future quotas on UK imports at most-favored-nation (MFN) tariff rates, which are generally lower than the punitive 25% tariffs previously imposed. However, continued access depends on UK producers demonstrating compliance with US supply chain and ownership security requirements.
The aerospace sector is another area that will see immediate tariff-free bilateral trade for certain products. This move aims to strengthen supply chains and reduce costs in this strategically important sector. Notably, aerospace products were previously subject to a pending US Section 232 national security investigation, and the deal effectively removes tariffs pending that investigation’s outcome.
The deal also increases US market access for British agricultural products, notably beef and ethanol, by reducing or eliminating longstanding non-tariff barriers. This opens opportunities for agricultural trade growth between the two countries. However, the abolition of the UK's 19% tariff on bioethanol has raised concerns among farmers about the potential extinction of domestic producers.
Compliance and national security are key aspects of the deal. Access to reduced tariffs and quotas is contingent on strict adherence to national security-related supply chain and ownership compliance requirements. This balance between trade liberalization and security concerns is expected to offer the UK’s steel, aerospace, automotive, and agricultural industries opportunities for tariff relief and access expansion in the US market, while requiring adjustments to meet security standards.
Prime Minister Keir Starmer believes the deal will safeguard key industries in the British economy by cutting steep levies set by President Donald Trump. However, US tariffs on steel and aluminium still stand at 25%, rather than falling to zero as originally agreed. The UK agriculture and farming industry faces changes under the trade deal, including a tariff-free quota on British and American beef.
The National Farmers' Union (NFU) has urged the government to act to minimize the impacts of potential increased imports on the UK economy and food security. Farmers and consumers are demanding more details on border checks to ensure safety measures are maintained. The NFU also urges both governments to confirm the UK's allocation for beef exports as soon as possible to ensure access to the US market for 2026.
The agreement's potential impacts extend beyond tariffs. For instance, US bioethanol imports could displace British production of the fuel, potentially impacting other sectors that rely on animal feed and carbon dioxide produced through bioethanol production. Delays to the removal of tariffs are "paralysing" the steel industry, according to Gareth Stace, director-general of UK Steel.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, expressed relief for UK automotive companies exporting to the US. The UK aerospace industry, which delivered £20bn in exports in one year, adding a value of over £13bn to the UK economy in 2024, is also set to benefit from the deal.
However, exports of goods to the United States, including precious metals, fell by £2bn in April 2025, raising questions about the immediate impact of the deal on the UK economy. The deal is expected to bring about a shift in trade dynamics between the two countries, and its long-term effects are yet to be fully understood.
- The Economic Prosperity Deal (EPD) has set a new tariff rate of 10% for UK-origin vehicles in the US market, a significant reduction from the previous 25%, opening new opportunities for UK automakers.
- The agreement also offers prospects for the steel and aluminum industries in the UK, with future quotas at most-favored-nation (MFN) tariff rates, which are generally lower than the previous 25% tariffs.
- The aerospace sector is anticipated to benefit from tariff-free bilateral trade for certain products, a move aimed at strengthening supply chains and reducing costs.
- In personal-finance and banking-and-insurance sectors, the deal could potentially lead to increased US market access for British agricultural products like beef and ethanol, although there are concerns about the potential extinction of domestic producers due to increased imports.
