By Alistair Smout and Andrew MacAskill
LONDON (Reuters) – The United States and Britain will announce a deal to lower tariffs on some goods on Thursday, the first such agreement since U.S. President Donald Trump sparked a global trade war with universal levies.
In posts on Truth Social, Trump said he would hold an Oval Office news conference at 10 a.m. EDT (1400 GMT) on Thursday about a “full and comprehensive” trade agreement with Britain.
Prime Minister Keir Starmer, who describes the U.S. as an indispensable ally, is due to provide an update later on Thursday. The deal is likely to be narrow, with Britain securing lower tariffs on cars and steel, the two sectors hardest hit.
“Because of our long time history and allegiance together, it is a great honor to have the United Kingdom as our FIRST announcement,” Trump said. “Many other deals, which are in serious stages of negotiation, to follow!”
The United States has been under pressure from investors to strike deals to de-escalate its tariff war after Trump’s often chaotic policymaking upended global trade with friends and foe alike, threatening to stoke inflation and start a recession.
Top U.S. officials have engaged in a flurry of meetings with trading partners since the president on April 2 imposed a 10% tariff on most countries, along with higher tariff rates for many trading partners that were then suspended for 90 days.
The U.S. has also imposed 25% tariffs on autos, steel and aluminium, 25% tariffs on Canada and Mexico, and 145% tariffs on China. U.S. and Chinese officials are due to hold talks in Switzerland on Saturday.
Starmer, who has struggled in government since he was elected last July with his centre-left Labour Party, has struck up a warm relationship with Trump and his government will celebrate becoming the first country to agree a deal.
Britain’s car industry exports luxury brands to the U.S. and the 25% tariffs had hit the industry hard. Jaguar Land Rover paused shipments of its cars to the U.S. for a month while it considered how to mitigate the impact. Shares in Aston Martin, which said it would split the cost of tariffs with its customers and limit shipments to the U.S., rose 8% on Thursday.
NARROW SCOPE
A British official had said that the scope of any agreement was likely to be narrow, with Britain expected to secure lower tariffs on a tranche of steel and autos exports.
In return, Britain is likely to agree to lower its own tariffs on U.S. cars and cut a digital sales tax that affects U.S. tech giants.
It had refused to lower its food standards, which are closely aligned with the European Union, however Britain’s farming trade union has said that some U.S. producers do meet British standards by not using growth hormones or antimicrobial washes, and could be given greater market access.
Starmer’s government has been walking a tightrope on trade, seeking as an independent country after Brexit to build new ties with the U.S., China and the EU without moving so far towards one bloc that it angers the others.
There are also political threats on the domestic front.
Polling shows the government remains deeply unpopular after it cut support for pensioner’s energy bills and hiked taxes on households and companies, making any move to cut taxes on multi-national tech companies a big risk.
POLITICAL RISK
Britain’s digital service tax, levied at 2% of UK revenue for online marketplaces, search engines and social media platforms, was introduced in 2020 in response to an outcry about tax avoidance by big tech.
It was expected to raise about 800 million pounds ($1.1 billion) this year, with more than 90% coming from five big tech firms, according to a 2023 report by lawmakers.
The status of the 10% “baseline” tariff imposed by Trump on most countries including Britain, or any threatened tariffs on the pharmaceutical industry, was unclear.
Parliament has said that Britain exported 7.2 billion pounds ($9.6 billion) worth of medicinal and pharmaceutical products to the U.S. in the year to September 2024, the second largest sector behind cars.
Economists and one FTSE 100 chief executive said the immediate impact of a tariff deal was likely to be limited for Britain but that trade agreements in general – it struck a free trade agreement with India earlier this week – would help to produce growth in the long run.
“The American, Indian and other deals we can do will be really important to the long-term economic health of the UK but don’t expect them to result in overnight euphoria,” the CEO said, speaking on the condition of anonymity.
JPMorgan economist Allan Monks said the upside would be limited if the 10% tariff stayed in place.
“With the UK having broadly balanced goods trade with the U.S., 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,” he said.
(Additional reporting by James Davey and Paul Sandle; writing by Kate Holton; Editing by Toby Chopra)
