UK closes in on US trade pact with lower tariff quotas for cars and steel

Unlock the White House Watch newsletter for free

Your guide to what Trump’s second term means for Washington, business and the world

The UK and the US are close to agreeing a trade pact that would cushion the impact of Donald Trump’s “liberation day” tariffs by granting lower-tariff quotas for UK steel and car exports, according to officials in London and Washington.

The deal, set to be signed this week, is due to include quotas that spare some UK exports from the full brunt of the additional 25 per cent tariffs that Trump levied on steel and car imports in February and March.

UK trade negotiators returned to Washington this week for the final stages of negotiations, which one senior UK official said were continuing “at speed”, cautioning that disagreements remain over pharmaceuticals.

As well as offering quotas for UK exports, the UK is also hoping to secure reductions in the sector specific 25 per cent tariffs that Trump has levied on steel and autos.

The UK’s “offers” include concessions to Washington on the digital services tax levied on international tech companies, cuts on tariffs imposed on US auto exports, and a reduction of tariffs on US agricultural products.

However, the UK government has said it will not accept US food production standards, such as chlorine-washed chicken and hormone-treated beef, which would make it impossible to conclude a so-called “veterinary agreement” with the EU, a key plank of its impending “reset” with Brussels.

The UK deal is one of 17 agreements that the Trump administration has been aiming to sign with its major trade partners as it rows back on the sweeping tariffs imposed on countries around the world on April 2.

US Treasury secretary Scott Bessent told a congressional hearing on Tuesday that some of those deals could be announced “perhaps as early as this week”, adding that several countries had made “good offers”, without providing details.

If successful, the US-UK agreement would follow the agreement of a full-blown Free Trade Agreement between India and the UK which was announced on Tuesday.

UK Prime Minister Sir Keir Starmer is under growing pressure to deliver a deal after the UK steel and auto industries warned of potentially “devastating” effects on their sectors. 

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, has warned that new US tariffs were having a “severe, significant and immediate” impact at the top end of the sector. Luxury marques such as Bentley, Jaguar Land Rover and Aston Martin depend heavily on exports to the US. 

The US is the UK’s second-largest export market after the EU, with more than 100,000 cars shipped last year, worth more than £7.5bn, according to the SMMT.

One senior auto industry executive welcomed the news of potential lower-tariff quotas for UK car exports, but warned that the key goal must be reducing the 25 per cent tariff rate.

“Quotas are complex to operate and inherently limiting to trade,” the executive added. “The most important thing is cutting the 25 per cent tariff, because above about 10 per cent, it’s just not sustainable.”

UK Steel, the trade association, has warned that the Trump tariffs will stifle exports for an industry that is already under pressure from a global glut of the metal. 

The US accounted for about 165,000 tonnes of Britain’s steel exports in 2023 — worth close to £400mn, about 8 per cent of the total by value. UK exports to the US have nearly halved since 2017 when Trump imposed tariffs during his first administration. 

Two people with knowledge of the negotiations said the deal was being held up by disagreements over the pharmaceutical sector. 

Last month the Trump administration launched national security probes into pharmaceuticals and microchips that could pave the way for tariffs on drugs — a UK export to the US worth £6.6bn in 2024. 

Britain is seeking to avoid the worst of any future tariff impacts, according to UK officials, who described the quotas on offer from the US as “generous”. A second UK official was more cautious, describing the deal as “limited”.