Trump’s UK-US trade deal, Implications for UK businesses

The United States and the UK reached a significant new trade agreement, described by President Donald Trump as a ‘breakthrough’ which was echoed by Sir Keir Starmer as an important milestone in strengthening transatlantic economic relationships. The deal addresses critical sectors and introduces notable tariff adjustments aimed at enhancing trade flows between the two nations.

Key components of the trade agreement:

• Automotive sector - the agreement reduces tariffs on UK car exports to the US from 27.5% to 10%, applicable to up to 100,000 vehicles annually.  This measure aims to bolster UK automotive manufacturing, improve competitive advantage and secure jobs within the sector.
• Steel and aluminium - the deal completely removes existing US tariffs on UK produced steel and aluminium products. This significant shift offers immediate relief and greater market access to British manufacturers, allowing them to compete more effectively on pricing and supply.
• Agriculture and food - as part of the agreement the UK has agreed to reduce tariffs and increase import quotas for US agricultural products, notably beef and ethanol. While these provisions open the UK market to increased competition from American producers, concerns have been raised about the impact on domestic sectors, including bioethanol producers.
• Aerospace industry – British made aerospace components, particularly high value products like Rolls Royce engines, will benefit from tariff exemptions under the deal, securing supply chains and enhancing the UK's competitive position in the global aerospace industry.

Despite these sector specific concessions, the US continues to maintain a general 10% tariff on other UK imports. This ongoing tariff barrier remains a point of concern for industries and businesses beyond those explicitly outlined in the current agreement.

What the deal means for SMEs

The new trade agreement presents both opportunities and challenges for SMEs. On one hand SMEs supplying or operating within automotive, steel, aluminium and aerospace supply chains may see a boost in orders, reduced export costs and better competitive positioning due to the lowered tariff barriers.  On the other hand, SMEs in agricultural or food production may face increased competition from US imports, potentially squeezing margins and requiring adaptation to maintain market share.

SMEs may also continue to face pressures from the retained 10% universal tariff on a variety of other goods, affecting their ability to price competitively in the US market. As smaller enterprises often operate with narrower margins and fewer resources, proactive financial planning, careful evaluation of supply chains and exploring new market strategies will be vital to ensure resilience in the face of changing trade dynamics.

The trade agreement results in significant and varied impacts across multiple industries, with particular benefits for automotive, steel, aluminium and aerospace. However, it also introduces competitive challenges particularly within agriculture and certain manufacturing sectors. UK businesses, especially SMEs, must remain agile and well informed, adjusting their strategic approach to leverage the agreement's benefits and mitigate potential drawbacks effectively.