United Kingdom–United States Trade Agreement (2025)

The United Kingdom–United States Trade Agreement is a trade arrangement signed in 2025 and entered into force on 30 June 2025. The agreement aims to expand market access between the two countries primarily through the reduction or elimination of tariffs in key sectors including automotive aerospace agriculture and energy. It was implemented by U.S. President Donald Trump and U.K. Prime Minister Keir Starmer.

Signing Process and Legal Basis

The general principles of the agreement between the United Kingdom and the United States were announced on 8 May 2025. This date coincided with the 80th anniversary of Victory in Europe Day during World War II. The executive order implementing the agreement was signed by U.S. President Trump on 16 June 2025. The executive order was prepared under the authority of Section 232 of the Trade Expansion Act of 1962 Section 604 of the Trade Act of 1974 and other national security based trade regulations.

Sectoral Provisions and Tariff Modifications

Automotive Sector

Under the agreement changes were made to import tariffs on UK originated automobiles. The previous import tariff rate of 27.5 percent was reduced to 10 percent for a specified quota of 100000 vehicles annually. Vehicles imported in excess of this quota remain subject to the previous tariff rate of 25 percent. Similarly for automotive parts the total customs duty rate on products imported from the United Kingdom has been lowered to 10 percent.

Aerospace Sector

Under the agreement’s provisions for the aerospace sector tariffs of 10 percent on aircraft engines and aircraft parts imported from the United Kingdom have been fully eliminated. This change includes products covered under the World Trade Organization’s Agreement on Civil Aircraft. The U.S. Department of Commerce has the authority to develop additional rules and procedures for implementing these provisions.

Agriculture and Food Products

Various customs tariffs on agricultural products exported from the United States to the United Kingdom have also been reduced. The United Kingdom has eliminated its 20 percent tariff on U.S. beef imports and raised the import quota to 13000 metric tons. Additionally the 19 percent tariff on ethanol exports from the United States to the United Kingdom has been removed. This adjustment enables approximately 1.4 billion liters of ethanol per year to enter the United Kingdom duty free.

However the United Kingdom government has stated that it will continue to enforce border controls and certification procedures to ensure that agricultural products imported from the United States meet national food safety standards. Specific measures will be taken to prevent products such as hormone treated beef from entering the UK market.

Steel and Aluminum Sector

No definitive agreement was reached on tariffs for the steel and aluminum sectors upon the agreement’s entry into force. Steel and aluminum products exported from the United Kingdom to the United States remain subject to a 25 percent tariff. If negotiations between the parties fail to produce a resolution the tariff rate risks increasing to 50 percent as of 9 July 2025.

The United States has stated that it will maintain the “melted and poured” requirement for steel and aluminum imports. This condition allows only products whose entire production process occurs within the United Kingdom to qualify for tariff exemption. It is known that some UK manufacturers carry out part of their production in countries such as India or the Netherlands. Additionally the United States plans to establish a quota based system for steel and aluminum products but the quota levels have not yet been determined.

Pharmaceutical Products

The section of the agreement concerning pharmaceutical products and drug ingredients has not yet been finalized. The governments of the United States and the United Kingdom have indicated that negotiations will continue to establish mutually beneficial trade conditions in this area. In 2024 the United Kingdom exported approximately £6.6 billion worth of pharmaceuticals to the United States while the United States exported approximately £4 billion worth of pharmaceuticals to the United Kingdom. Negotiations between the two countries have focused particularly on supply chain security and product standards.

Digital Services Tax and Technology

No changes have been made to the United Kingdom’s digital services tax regime under the agreement. The United Kingdom continues to levy a 2 percent digital services tax on companies with global revenues exceeding £500 million and UK revenues exceeding £25 million. This practice primarily affects major American technology firms such as Meta Google and Apple. The U.S. administration has characterized this tax as “discriminatory and unfair.” The parties have agreed to pursue a separate agreement on digital trade.

Administrative Arrangements and Implementation Process

In implementing the agreement the U.S. Department of Commerce the U.S. International Trade Commission and U.S. Customs and Border Protection are working in coordination. On the United Kingdom side the Department for Business and Trade and Parliament are overseeing the implementation of various aspects of the agreement. Negotiations on steel aluminum pharmaceuticals and digital services remain ongoing.

Final agreement has not yet been reached on certain provisions of the agreement notably those concerning steel and aluminum tariffs. U.S. President Donald Trump has stated that if no agreement is reached by 9 July 2025 the current tariffs will be raised to 50 percent. Furthermore new negotiation processes are anticipated for pharmaceutical products digital services and future national security reviews.