Market News

BY Eir Nolsoe

As much as Jonathan Reynolds’ opponents will hate to admit, it has been a positive week for the Business and Trade Secretary. But it is only Thursday.

The ink on Britain’s landmark post-Brexit trade deal with India had hardly dried before the news broke that an agreement with the US was imminent. Writing on Truth Social overnight, Donald Trump said it was a “great honour” to have the UK be the first trade deal signed with the United States, claiming it will be “full and comprehensive”.

The devil will, however, be in the detail. And notably, UK officials had been seeking to temper expectations.

It is now clear that the UK has secured a deal shielding some of the most vulnerable sectors – but there are big issues that remain unresolved.

Here are the sectors that will be spared – and the ones that won’t.

British carmakers

The threat of 25pc tariffs to struggling British car manufacturers has been at the forefront of negotiators’ minds.

Tariffs on cars will be slashed to 10pc for an agreed quota of 100,000 cars, cushioning the blow.

British manufacturers exported just over 100,000 cars to the US last year, making this a major win for the industry.

The Institute for Public Policy Research had warned that 25,000 jobs in the car industry were at risk from 25pc tariffs, hitting Britain’s industrial heartlands the hardest.

The carve-out is particularly valuable for companies such as Jaguar Land Rover, as the US market generates most revenue for the carmaker.

The Government said the tariff reduction will save JLR hundreds of millions of pounds a year alone.

Steel and aluminium

In another big win, the UK will be spared completely from steel and aluminium tariffs, which rose to 25pc after Trump kicked off his trade war in February.

The UK sells around 200,000 tonnes of steel a year to the US, worth over £400m.

Britain’s aluminium sector had also warned of an existential threat from the tariffs, with 10pc of its exports sold to the US for a value of £225m.

Securing this concession from Trump was crucial for both sectors.

Food

The biggest concession that Sir Keir Starmer, the Prime Minister, has offered Trump is slashing tariffs on US beef imports from up to 20pc to zero.

The White House said this creates a $5bn (£3.8bn) opportunity for new exports for US farmers, ranchers and producers.

The move is, however, likely to further anger British farmers, who already harbour resentment towards the Government for its inheritance tax changes.

British beef exports to the US will also face a reduction in tariffs from up to 26pc to zero for a quota of 13,000 metric tonnes a year.

The Government said it had given no concessions on food standards, meaning no hormone-fed beef will end up on UK shelves.

Experts believe a full-fat trade agreement with the US, like the one Theresa May tried to secure during her premiership, is off the table because of such red lines over food standards.

British ministers have explicitly ruled out accepting controversial products like chlorinated chicken and hormone-fed beef, much to Trump’s dismay.

Accepting such food standards would make it impossible to achieve a veterinary agreement with the EU, which was a Labour manifesto pledge to prevent border checks and lower prices.

Britain has also slashed the tariff on ethanol imported from the US to zero.

Pharmaceuticals

Trump is yet to announce how hard he plans to hit foreign pharmaceutical companies.

This is a particular concern for some of Britain’s biggest companies, such as GSK and AstraZeneca.

The deal announced on Thursday does not cover pharmaceuticals. The Government said work continues on this, although Trump has agreed to give the UK “preferential treatment”.

The US president has said he will set out levies on the sector over the next two weeks, after launching an investigation into the national security implications of such imports at the start of April.

It is understood that pharmaceuticals have been a sticking point in UK negotiations with the US.

Any meaningful deal for the UK would have to include the industry. However, a failure to secure a more comprehensive agreement this week suggests the issue remains unresolved.

The UK sold £6.5bn worth of pharmaceuticals to the US last year, making it one of the top exports.

Film tariffs

Trump warned on Sunday that he planned to hit foreign film imports with tariffs of 100pc, in another late curveball complicating negotiations.

While taxing services is notoriously difficult and details remain scarce, UK film insiders have warned such tariffs could “wipe out the UK industry”.

Film and TV are seen as some of the UK’s most successful service exports, but have struggled to recover under high interest rates and after Hollywood strikes.

The UK Government was in “active discussions” with the White House about these tariffs, Chris Bryant, the culture minister, said on Wednesday.

However, there was no sign of reprieve for the sector in Thursday’s deal.

Services

One of the biggest concessions Britain had been expected to offer to protect its manufacturing industry was related to the Digital Services Tax, which affects tech giants such as Google and Meta.

However, the 2pc tax on revenues from search engines, social media services and online marketplaces has been left untouched – for now.

The Government introduced the £800m levy in 2022 but it remains on the table in negotiations, with the US president previously comparing digital taxes of this type to “overseas extortion”.

However, if Reynolds agrees to cave into US tech billionaires, it is likely to enrage backbench Labour MPs, who are already up in arms over welfare cuts.

On a more positive note, ministers believe there is scope to secure a better deal on services with the US, which account for a far greater proportion of US exports than goods.

The UK sold £137bn of services to the US last year, making up for than a quarter of all such exports.

The Government said the UK and US have agreed to work on a digital trade deal that will “strip back paperwork for British firms trying to export to the US”.

The unanswered questions

There was little concrete to celebrate for the film and TV industry and pharmaceutical companies. Whether offering reciprocal access to the US market will win over farmers is also questionable.

Economists have furthermore warned that the overall impact of the trade deal may be limited.

Most UK exports are still subject to 10pc tariffs across the board.

Allan Monks, an economist at JP Morgan, earlier said that the scope of the deal “looks limited” and “the economic impact for the UK is likely to be very small”.

Monks put the overall boost to GDP at a measly 0.1pc, but said it would help key industries.

He warned that Britain’s attempt to get a reset in EU relations ahead of a summit on May 19 meant “subsequent progress on key outstanding issues with the US could become harder”.

He said: “If there is no further breakthrough on the US baseline tariff, that would significantly limit the economic upside from continued negotiations and further concessions.

“With the UK having broadly balanced goods trade with the US, a reasonably good political relationship, no real threat of retaliation from Westminster and extensive bilateral negotiations having taken place, it is not clear where the UK can go from here.”

Negotiations over the unresolved issues continue, according to the Government - potentially paving the way for a more comprehensive agreement.

For now, Sir Keir has said the deal will save thousands of jobs.

Trump was pleased too, telling reporters: “This is now turning out to be, really, a great deal for both countries.”

Britain’s farmers, film-makers and pharmaceutical bosses may need more convincing.