Sir Keir Starmer’s historic trade deal with the US will save the UK economy £6.5bn in harm from Donald Trump’s tariffs, The Independent can reveal.
The agreement, hailed by the prime minister as a “boost for businesses” that would save thousands of British jobs, was the first to be confirmed with any country since the president’s sweeping tariffs cause market turmoil last month.
Under the full slate of levies, the UK would have taken a £10.8bn hit to the economy by 2030, with warnings 137,000 jobs would be have been lost or under threat, an analysis by economists at the University of Birmingham found.
Now, with tariffs on cars slashed from 27.5 per cent to 10 per cent and taxes on steel removed entirely, the deal will soften the blow by half and affect 59,000 jobs, researchers Dr Huanjia Ma and Dr Matt Lyons said.
“Our initial estimate shows that the new UK US trade deal, while still leaving the UK worse off than in a no tariff scenario, could more than halve the total negative impact on GDP from £10.8 billion to £4.3 billion,” Dr Ma told The Independent.
“This mainly reflects smaller shocks to the automotive sector and the removal of beef, steel and aluminium trade barriers.”
The researchers’ analysis assumes that the cost of tariffs will be passed onto customers, and accounts for a 1.5 per cent price variation based on product demand for cars and 0.4 per cent for everything else.
The new estimates include both changes to automotive tariffs, assuming all UK car exports face a 10 per cent tax, and the additional exports resulting from the removal of tariffs on beef, steel and aluminium.
The deal comes hot on the heels of the UK’s long-awaited trade deal with India which was signed on Tuesday after years of negotiations. That is expected to increase the UK’s Gross Domestic Product (GDP) by £4.8bn each year by 2040, with trade between the two countries projected to increase by £25.5bn each year.
Responding to the latest figures, the business secretary Jonathan Reynolds told The Independent: “This deal is just the beginning, and talks will continue on a wider UK-US economic deal.”
He said the Labour government had been clear its mission was to “work in the interest of British jobs, workers and families to put money in people’s pockets and that’s precisely what this deal delivers.”
Liam Byrne, the chair of the Commons Business Committee and a Labour MP, said: “The facts now speak for themselves. A small retreat on agriculture has delivered a huge reprieve for Britain’s factories and forges. This is a win-win for UK consumers and workers and crucially it doesn’t jeopardise the bigger prize still within our grasp, which is a big ambitious reset with our closest neighbour, the European Union.”
The deal concludes five years of negotiations between the two countries, spanning two presidents and five prime ministers.
While a 10 per cent tariff still applies to all goods exported to the US, with the exception of copper, pharmaceuticals, semiconductors, timber, and energy products, it is seen as a big political win for Sir Keir.
Emily Jones, professor of public policy at the University of Oxford, called the US-UK agreement a “skilful piece of negotiation” due to the smaller compromises made by the UK.
“While we are still worse off overall than we were a year ago, the sky-high tariffs applied to the steel and car industry have been reduced,” she said.
“In return the UK seems to have made some modest concessions, including opening up its market to some more beef and ethanol.”
British cars will have advantage over European rivals
The most significant win for Sir Keir is the carveout for Britain’s automotive industry with a reduced 10 per cent tariff on a quota of 100,000 cars a year – almost all those sold by the UK to the US annually.
Cars are Britain’s single largest export to the US, valued at £9 billion in 2024 alone, and the government has claimed that the deal saves “thousands” of jobs for the industry.
“This is a huge sigh of relief for both automotive brands and the supply chain. To have the baseline of 10 per cent is a huge relief, but it also gives a very serious competitive advantage,” said Marco Forgione, director general of the Chartered Institute of Export and International Trade (CIEIT).
The reduced tariff could be more profitable as it will put UK car brands at a competitive advantage. Cars sold in the US tend to be higher-end brands, such as Land Rover, Jaguar, and Aston Martin. But competition in this market comes from other European brands, not American cars, according to Mr Forgione.
“We compete against EU-based automotive brands, and they are being taxed at 17.5 per cent more than the UK. So, yeah, it’s a big advantage for UK automotive,” he said.
Steel in the works
Another success is the elimination of all tariffs on UK steel exports, down from the 25 per cent across the board for other global steel producers.
“I think this is actually the most important part of the agreement,” Mr Forgione said. “This move is very much about economic security.”
In Thursday’s announcement, US secretary of commerce Howard Lutnick hinted that the UK had agreed to new quotas and tariffs to boost homegrown steel production, to be part of a joint “resurgence of steel and aluminium”. The US is the second-largest export market for steel after the EU, worth over £400 million according to trade body UK Steel.
It deal follows the government’s dramatic intervention to rescue British Steel, after its Chinese owner Jingye was allegedly allowing resources to run out which would have led to the possible shutdown of its Scunthorpe plant, effectively ending steelmaking in Britain.
Mr Lutnick suggested that the UK had nationalised British Steel as part of the trade agreement – something which the UK government itself has not confirmed.
Other parties are pushing the government to push the US harder in future negotiations, with the Conservatives claiming that the government didn’t go far enough with this deal.
Andrew Griffith, the shadow business secretary, said: “President Trump’s tariffs were highly damaging to British businesses, threatening jobs, and even entire industries. This was Labour’s chance to fix it. They failed.
“Instead of standing up for Britain, they rolled over. Most of our exporters will still pay 10 per cent tariffs, our world-leading film industry could still be hammered by a 100 per cent tariff, and after months of talks, this so-called ‘deal’ gives us next to nothing in return”
Liberal Democrat treasury Spokesperson Daisy Cooper accepted some of the advantages of the deal, but that more is needed: “While this deal will ease some of the pain on some British businesses and workers, Trump’s terrible tariffs are still hitting the UK hard.
“In the next stage of UK-US negotiations, ministers must rule out slashing taxes on US tech billionaires or selling out our farmers, and they must give parliament a vote on any future trade deal.
“Recognising how unpredictable Trump is, the government must also now turbo-charge trade relations with our European and Commonwealth allies.”
