Trump Announces Framework With UK, Lowering Trade Barriers

U.S. President Donald Trump announced a trade framework with the U.K., hailing it as a “breakthrough” that will bring down barriers and expand market access for American imports.

“I’m thrilled to announce that we’ve reached a breakthrough trade deal with the United Kingdom,” Trump said Thursday in the Oval Office.

Trump said final details of the pact would still be negotiated over the “coming weeks.” But under the agreement, the U.K. would fast-track American goods through their customs process and reduce barriers on agricultural, chemical, energy and industrial exports.

“The deal includes billions of dollars of increased market access for American exports, especially in agriculture, dramatically increasing access for American beef, ethanol and virtually all of the products produced by our great farmers,” Trump said.

The announcement is the first Trump made since imposing high tariffs on dozens of U.S. trading partners. The president later paused those duties temporarily in order to allow nations to reach agreements with the U.S.

“This is going to boost trade between and across our countries, it’s going to not only protect jobs, but create jobs, opening market access,” said UK Prime Minister Keir Starmer, who dialed into the event by phone.

The pact spurred cautious optimism on Wall Street, with stocks up and bonds down amid hopes that the agreement could be a blueprint. The S&P 500 Index rose for a second straight day, but traded off session highs. Treasuries, gold and haven currencies lost steam.

The British deal may provide clues for the shape of potential future agreements with other economies. The terms are limited in scope and they keep in place a 10% baseline tariff, according to Commerce Secretary Howard Lutnick.

Under the agreement, U.K. manufacturers would be allowed to send 100,000 cars into the US under a 10% tariff — rather than a 27.5% rate they previously faced after Trump raised duties.

“For the U.K. auto people, this is tens of thousands of jobs that the president agreed that he would protect for them,” Lutnick told reporters.

Engines and plane parts from Rolls-Royce Holdings PLC will be able to enter the US market without tariffs and a British airline will buy $10 billion worth of Boeing Co. planes, Lutnick said, without naming the carrier.

U.S. tariffs on steel and aluminum from the UK will go to zero, according to a statement from the British government. British farmers will be given a tariff-free quota for 13,000 metric tonnes of beef. The UK will not weaken its food standards on American imports, the statement said.

Among the important issues that still need to be worked out: how or if the U.K. would alter its digital services tax, which impacts some major U.S. tech companies.

The U.K. is not changing its tax under the deal, according to a fact sheet from Starmer’s government. Instead, the nations “have agreed to work on a digital trade deal that will strip back paperwork for British firms trying to export to the U.S.”

Talks will also continue on the pharmaceutical industry and remaining levies, the UK said. But the Trump administration will give the UK “preferential treatment” in any additional sectoral tariffs Trump decides to impose, which are expected to include drugs, lumber, copper, and semiconductors, among other products. British government officials had for weeks pushed their US counterparts to relax Trump’s 25% tariffs on steel, aluminum and automobiles.

The U.K. and U.S. are also expected to negotiate an advanced technology partnership on issues including quantum computing, nuclear fusion and aerospace.

With polls showing Americans souring on his economic stewardship, Thursday’s deal is a sign that Trump is seeking an off-ramp from his plan to raise U.S. tariffs to their highest level in a century. Trump has been trying to pressure other countries to reach quick agreements with the U.S. amid the 90-day reprieve. The U.K.’s tariffs were originally set at 10%, meaning it didn’t directly benefit from that temporary easement.

The president is also locked in a standoff with China, the U.S.’s third-largest trading partner on which he imposed 145% tariffs. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer are kicking off formal talks this week with their Chinese counterpart, but Trump ruled out preemptively lowering his duties to speed a deal.

Trump imposed his duties on April 2, but backtracked a week later as a panic ensued in the bond market and investors sold off stocks. He left the 10% duty in place on virtually all trading partners during the negotiating period. The UK had escaped the higher, so-called “reciprocal” levies because its one of the few major economies with which the US does not run a trade deficit.

Automotive trade between the two countries is lopsided, with the US importing $8.19 billion worth of new vehicles from the UK last year. That’s more than 10-fold the value of U.S. passenger cars and light trucks exported to the UK, according to US Commerce Department data.

The move provides relief to a relatively small share of the total autos imported to the US. About 96,000 UK-made cars and light trucks came to the U.S. last year, worth about $8.2 billion, according to Commerce Department data. By contrast, Mexico, the largest source of U.S. auto imports, supplied nearly 3 million vehicles last year.

Luxury and specialty brands such as Range Rover maker Jaguar Land Rover Automotive PLC , supercar maker McLaren and Aston Martin are among those that stand to benefit.

A US trade deal has long been held up as one of the great prizes of the UK’s departure from the European Union, and the pact raised hopes it could lift the outlook for the British economy.

It’s also a validation of Starmer’s approach to dealing with Trump. During his first White House visit earlier this year, Starmer impressed the US president with an invitation from King Charles III to make a second state visit.

In a press conference after the Bank of England’s decision to cut interest rates, Governor Andrew Bailey said he welcomed the reported trade deal and hoped that the U.S. would reach agreements with other countries, which could ease some of the risk to growth.

“It will help to reduce uncertainty, and that’s important,” he said. “The U.K. is though very open economy. So the UK is also affected by the way in which trade policy and tariffs affect obviously other economies.”

While Trump and his aides have expressed an appetite for deals, the president continued to send mixed signals on trade policy on Tuesday when he downplayed the importance of agreements and said he would simply dictate tariff levels and trade concessions on partners looking to reduce higher duties if negotiations falter.

The unpredictable nature of Trump has fueled uncertainty for investors and business executives worried about the impact of his tariffs.

Long Negotiation

The length of time it took for both nations, which have largely been enthusiastic partners, to reach the agreement could also serve as a warning sign that it may not be easy to hammer out pacts with other countries the Trump administration has prioritized, including Japan, India, Israel and South Korea.

British and U.S. negotiators held five rounds of talks during the first Trump presidency, his successor, Joe Biden, suspended them. After all that, Thursday’s agreement — five years after Brexit — stopped a long way short of the “all-singing, all-dancing” deal that former Prime Minister Boris Johnson once said was possible.

U.S. talks with several nations have centered around, at best, a top-line deal on commitments and intentions that may leave many details traditionally included in comprehensive trade agreements to be negotiated later.

The U.K. is still likely to be in a worse economic position with its biggest individual trading partner than before Trump’s tariff war, providing potential attack lines for Starmer’s domestic political opponents.

Starmer’s government has worked to shore up the UK economy by solidifying relationships with other trading partners. On Tuesday, it reached a landmark deal with India and has long been negotiating a pact with the E.U.