President Trump and UK Prime Minister Starmer signed an agreement on June 16, 2025, entitled the “US-UK Economic Prosperity Deal,” that will reduce some tariffs on imports from the UK; the treatment of some imports is still under negotiation. The agreement, announced during the G7 summit in Canada, includes reduced tariffs on UK auto and aerospace goods, as well as reduced tariffs on U.S. meat and ethanol but does not address steel and aluminum or pharmaceuticals. In exchange for the lowered tariff treatment, the UK has committed to working to meet U.S. requirements on the security of the supply chains of steel and aluminum products intended for export to the U.S. and on the nature of ownership of relevant production facilities.
An executive order (EO) and Fact Sheet issued by the president shortly after the signing set out the terms of the agreement. The general terms of the pact were originally announced on May 8, 2025.
Overview of the Agreement
- Automobiles and Auto Parts: The U.S. will establish an annual tariff-rate quota (TRQ) of 100,000 automobiles (Harmonized Tariff Schedule of the United States (HTSUS) Heading 8703) from the UK. Imports within this quota will be subject to a reduced 10% tariff, down from 27.5%. The 10% tariff is comprised of a 7.5% Section 232 “national security” tariff, as well as a 2.5% Normal Trade Relations (NTR) duty. Vehicles exceeding the quota will be subject to the full 27.5% tariff. Automotive parts of the UK for use in automobiles that are products of the UK will also qualify for the 10% combined tariff.
- Aerospace: Products of the UK covered by the World Trade Organization Agreement on Trade in Civil Aircraft will be tariff-free, eliminating a 10% universal tariff on many civil aircraft components (including engines).
- Steel and aluminum: New TRQs are expected for UK-originating steel and aluminum (and their derivatives), contingent on the UK meeting U.S. supply chain security and ownership requirements. Imports exceeding these quotas will be subject to the 25% Section 232 steel and aluminum tariffs, a rate that is now set at 50% for imports from all other countries.
With respect to pharmaceuticals, the EO states that the parties have committed “to negotiate significantly preferential treatment outcomes on pharmaceuticals and pharmaceutical ingredients that are products of the United Kingdom.” The outcome, however, will be contingent on the conclusion of an ongoing Section 232 investigation launched on May 1, 2025. The outcome also hinges on UK compliance with certain supply chain security standards.
For its part, the UK will eliminate the 20% tariff on U.S. beef exports within a quota of 1,000 metric tons and will create a preferential duty-free quota of 13,000 metric tons for U.S. beef. In addition, the UK has granted a tariff-free quota of 1.4 billion liters of U.S. ethanol. Previously, U.S. ethanol shipments to the UK were subject to a 19% tariff.
It should be noted that this kind of trade deal is not subject to approval by the U.S. Congress because it is not a formal free trade agreement. Indeed, even the U.S. and UK “recognize that this document does not constitute a legally binding agreement.” The legislation necessary for President Trump to negotiate comprehensive trade agreements (Trade Promotion Authority) lapsed in 2021. Without this authority, the president can only enter into agreements that are “temporary,” i.e., if the succeeding member state governments change hands and the next leader on either side is not interested in continuing the agreement, that country can simply withdraw.
BDO Insight
The agreement provides immediate benefits to the automotive and aerospace sectors, but leaves steel, aluminum, and pharmaceuticals subject to further negotiation and compliance requirements. Businesses in these sectors should closely monitor developments and prepare for potential changes in supply chain documentation and ownership structures.
The U.S. emphasis on supply chain security and ownership transparency, particularly for steel and aluminum, signals a continued focus on national security in trade policy. UK exporters may need to adapt compliance processes to meet these new standards.
The removal of UK tariffs on U.S. beef and ethanol opens new opportunities for U.S. exporters, particularly in the agricultural and biofuel sectors.
The current Congress appears to have no appetite for passing Trade Promotion Authority so the new U.S.-UK trade deal may only survive through the end of the current U.S. administration. Only a formal free trade agreement ratified by Congress (and any other party’s legislative body) can continue through successive governments unless the agreement explicitly contains a timetable (for example, the United States Mexico Canada Agreement that became law in 2020 will end in 2026 unless re-authorized by Congress).
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