Breaking down the UK-US tariff deal

 

The US and the UK have reached a deal over tariffs on some goods being trade between the countries.

US President Donald Trump's blanket 10% tariffs on imports from countries around the world remains in place and still applies to most UK goods entering the US.

But the deal has reversed or cut tariffs on the certain goods which make up the UK's biggest exports, including cars, steel and aluminium.

Here's an at-a-glance look at what's in the deal.

This isn't a trade deal

US President Donald Trump declared on social media this announcement would be a "major trade deal" - it's not that.

He does not have the authority to sign the type of free-trade agreement India and the UK finalised earlier this week - this lies with Congress.

Congress would need to approve a trade agreement, which would take longer than the 90-day pause in place on some of Trump's tariffs.

This is an agreement which has reversed or cut some of those tariffs on specific goods.

What was announced today is only the bare bones of a narrow agreement.

There will be months of negotiations and legal paperwork to follow.

Car tariff cut to 10%

Trump had placed import taxes of 27.5% on cars and car parts coming into the US.

This has been cut to 10% for a quota of 100,000 UK cars, almost the total the UK exported last year.

Cars are our biggest export to the US - worth about £9bn last year.

The quota system allows the UK to sell a certain number of cars into the US under low or zero tariffs, with extra charges on vehicles above that quota.

Car industry leaders have told the BBC a quota could effectively put a ceiling on the number they can export competitively.

The UK currently imposes a 10% on US car imports, but it is not yet clear if there had been any change to this.

The US has previously demanded the import tax be cut to 2.5%, and Chancellor Rachel Reeves has indicated she is open to such a cut.

Trump also announced that Rolls Royce engines and plane parts will be able to be exported from the UK to the US tariff free.

He also said the UK was buying $10bn worth of Boeing planes from the US.

No tariffs on steel and aluminium

A 25% tariff on steel and aluminium imports into the US that came into effect in March has been scrapped as part of this deal.

This is huge news for likes of British Steel which was brought under government control as it struggled to stay operational.

The UK exports a relatively small amount of steel and aluminium to the US, around £700m in total.

However the tariffs also cover products made with steel and aluminium, including things such as gym equipment, furniture and machinery.

These are worth much more, about £2.2bn, or about 5% of UK exports to the US last year.

Steel industry leaders had warned if the 25% tariff wasn't lowered or removed it would have been devastating for the industry.

Pharmaceuticals still the big unknown

What will be agreed on pharmaceuticals is still unknown.

"Work will continue on the remaining sectors – such as pharmaceuticals and remaining reciprocal tariffs," a statement from the UK government said.

Most countries, including the US, imposed few or no tariffs on finished drugs, as part of an agreement aimed at keeping medicines affordable.

Pharmaceuticals are a major export for the UK when it comes to US trade – last year sales of medicinal and pharmaceutical products were worth £6.6bn ($8.76bn) making it the UK's second-biggest export to the US.

It's also America's fourth biggest export to the UK, valued at £4bn ($5.3bn) last year.

The president has not announced any trade restrictions on medicines yet.

There is a danger that the UK could agree a deal, but is then subsequently hit by a global tariff.

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No change on digital services tax

There was no change to the UK's 2% digital services tax on US firms in this deal.

The tax is on businesses that run social media, search engines or online marketplaces and applies to revenues derived from UK users.

Firms only have to pay it if they raise more than £500m in global revenues and £25m from UK users annually.

But this is a threshold easily met by US tech giants like Meta, Google, Apple.

The UK reportedly netted nearly £360m from American tech firms via the tax in its first year.

Instead of any change to the digital services tax the UK and US had "agreed to work on a digital trade deal", the UK government said.

It said this would "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".

No drop to food standards

The UK has removed tariffs on American beef and other agricultural products, the White House press conference heard.

UK farmers have also been given a tariff free quota for 13,000 metric tonnes.

There will be no weakening of UK food standards on imports, the UK government statement said.

Many American farmers use growth hormones as a standard part of their beef production, something that was banned in the UK and the European Union in the 1980s.

The US has previously pushed for a relaxation of rules for its agricultural products, including beef from cattle that have been given growth hormones.

This is an area where the UK has chosen alignment with EU - and the forthcoming "Brexit reset" with the EU - over the US.

The tariff on ethanol which is used to produce beer coming into the UK from the US has also been scrapped.

"They'll also be fast tracking American goods through their customs process, so our exports go to a very, very quick form of approval, and there won't be any red tape," Trump said.