Donald Trump signed an executive order on Monday, 16 June, which will reduce tariffs on UK car and aerospace exports. The order was signed shortly after the US president met with prime minister Keir Starmer at the G7 Summit in Canada. They first announced the UK-US trade deal in May.
Car tariffs will be reduced to 10% on a quota of up to 100,000 cars, down from 25%. Aerospace tariffs will be reduced from 10% to zero. The order will come into effect on 23 June, seven days after being published in the Federal register.
While the deal is in many respects a success, representing the favourable treatment Trump has so far shown the UK, steel and aluminium tariffs of 25% remain in place while further details are hashed out. These were meant to be reduced to zero under plans outlined last month.
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Reports suggest the Chinese ownership of British Steel could be a sticking point. The UK government took operational control of the company in April after Jingye Group, the legal owner, confirmed its intention to close the blast furnaces in Scunthorpe. The government is thought to be looking at plans to nationalise the company.
The current 25% metal tariff is still lower than the rate of 50% being applied to other countries after Trump doubled the levy in early June. An executive order signed by Trump said the UK was committed to meeting American requirements relating to the security of supply chains and the ownership of production facilities.
Commenting on the agreement, business and trade secretary Jonathan Reynolds said: “We agreed this deal with the US to ensure jobs and livelihoods in some of our most vital sectors were protected, and since then we have been focused on delivering those benefits to businesses.
“Bringing trade deals into force can take several months, yet we are delivering on the first set of agreements in a matter of weeks.”
The Department for Business and Trade added that it would continue to make progress towards 0% tariffs on core steel products as agreed with the US in May.
Will steel tariffs be lifted?
The latest executive order leaves the steel and aluminium industries in limbo. Around 9% of UK steel exports go to the US, making it the second most important export market for the metal, worth around £400 million.
Despite this, industry body UK Steel said it was “heartened” by Monday’s news, which showed the UK-US deal had taken another step forward. Both the US and UK governments have indicated that tariffs will be reduced to zero in due course, if certain conditions are met.
“Yesterday's meeting shows that the prime minister is personally taking responsibility for the long-term relationship of our steel industry with the US market,” said Gareth Stace, director-general at UK Steel.
“We look forward to imminently benefitting from a tariff rate cut similar to that which the automotive and aerospace industries will enjoy in seven days.”
Stace said the industry “badly needs clarification” over the current US requirement that steel should be “melted and poured” in the UK, if it is to qualify for a tariff exemption. The industry is also seeking further details on quotas.
In a separate announcement on Tuesday, 17 June, the Department for Transport confirmed a new £500 million rail contract which will see British Steel supplying Network Rail with at least 337,000 tonnes of steel over the next five years.
The government said the rail contract will protect thousands of steelworkers’ jobs.
How will the UK-US tariff deal impact the car industry?
Motor vehicle manufacturing contributed £21 billion to the UK economy last year, equivalent to 0.9% of economic output. The sector employs 139,000 people, and making cars for export is an important part of their work.
The US is the UK’s largest export partner for cars, accounting for around 27% of the total last year, equivalent to £9 billion.
Mike Hawes, chief executive at the Society of Motor Manufacturers and Traders (SMMT), said the agreement was “great news” for the automotive industry.
“We wait to see the full details of the deal and how it will be administered but this will be a huge reassurance to those that work in the sector and bolster the confidence of our important US customers,” Hawes added.
The FTSE 100 shrugged off the deal this morning, opening 0.6% lower as other news dominated the headlines, including further missile strikes between Israel and Iran. News of the trade deal was also priced in back in May, when it was first announced.
UK car manufacturer Aston Martin Lagonda opened higher this morning before falling back. Shortly after 1.30pm, it was down by around 0.6% in today’s trading session. Rolls-Royce is roughly flat.
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