UK ranchers are taking away from others, even though those other countries, such as Brazil, who regularly blow past their quota limit, with importers happy to pay the 25% tariff.
In addition, the UK “will reduce non-tariff barriers” and will fast track American goods through their customs process for a quicker form of approval and less red tape. The U.S. will in turn do the same for UK goods. Tariffs on “row crops” like corn were reduced to zero, though it is unclear if the UK farmer got zero tariffs as well on those, or other agricultural items. The UK has allowed for a new tariff rate quota on 1.4 billion liters for corn ethanol. This could keep some farm state Senators in the U.S. happy.
The U.S. will allow in 100,000 cars at a 10% tariff, going to the Section 232 rate of 25% thereafter. The top cars exported from the UK are Jaguar and Land Rover models, followed by MINI Coopers. This volume is equal to what the U.S. imported from those car companies last year, only now they will be subject to the 10% tariff. Trump and Lutnick each said that this will protect high-paying jobs in the UK, so this seems more like a gesture of goodwill towards a country in which the U.S. actually has a trade surplus.
Trump admitted that Jaguars would “never be made in the U.S.” and that his target for the Section 232 tariffs were mass-consumption cars. However, the MINI models are mass-market vehicles and they will now have a lower tariff than similar four door cross-over vehicles coming from Asia and the EU. This could be a sticking point in trade negotiations, though for now it could be that the UK is getting a better deal on the Section 232 tariff only because there is more balanced trade between the two. The same cannot be said for any other auto producer.
Section 232 also got whittled down for UK steel, an industry in dire straits. The U.S. said that they can export duty free under the old quota system from the Biden administration “dependent on the nature of ownership of the relevant production facilities.” Imports of hot and cold rolled steel have been in decline since 2018. But in 2023, with the quota system in place, the U.S. imported 6,468 metric tons of steel tubes and pipes valued at $44.8 million, up from 4,519 tons valued at $23.7 million in 2018, based on World Bank data.
For some, the UK negotiations on Section 232 tariffs generate some uncertainty over future concessions. If these are negotiated away, they will have an immediate effect on the investments the Section 232 action was meant to encourage, and Washington will see increased calls from other trade partners for the same treatment. Then we are back to poking holes in the Section 232 tariffs, a move that led the Trump Administration to re-impose them globally in the first place last month. More details will come out on this in the coming weeks.
Besides some 232 question marks, a prime example of how the UK becomes part of the U.S. economic security umbrella is the Rolls Royce deal. They make jet engines for Boeing. They were given duty free access, but in return for that Boeing allegedly is set to receive a nice deal with a British airline company. Again, it is unknown who will buy those Boeings with the Rolls Royce engines, but these U.S./UK made aircraft will result in higher sales for Boeing. Whether the UK makes a similar deal with France in the future is the wild card, of course.
Very important to note here is that this Rolls Royce/Boeing agreement comes at a time when Ryanair, a low cost airline in the UK, was courting China’s Boeing rival COMAC to purchase aircraft. This would have marked the beginning of the end for Boeing’s market share in Europe. COMAC’s growth would also lead British and American jet engine makers to set up shop in China if they want to do business with COMAC. This is one of the few advanced technology segments where the U.S. actually enjoys a trade surplus with the world.
The deal also adds more market access for U.S. made industrial machinery, and there were hints about working together on advanced semiconductors and technology. No specific products were announced, but presumably this brings the UK in line with how Washington wants to protect advanced chips manufacturing; and make sure UK rivals are not sourcing from China, for example, which is a potential death knell for U.S. chip makers as China is fast moving up the food chain in semiconductors.
Pharmaceuticals from the UK may yet get preferential treatment, but this depends on the Section 232 investigation, the White House said in a statement. There is a sense from that statement that these deals on pharma, similar to steel, are contingent on who owns the lab, and where they are getting core components, such as active pharmaceutical ingredients used in medications. This is all a work in progress and may not be as complete as we think.
Lastly, President Trump also hinted about shipbuilding, suggesting the two countries will join forces and work together to build commercial vessels. This sector is almost entirely Asian shipbuilding now. “We used to build ships and we eased up on that, and we are going to work together on this,” Trump said.
UK and China Tariff Agreements Might be The First and the Last
This month’s tariff agreements with the United Kingdom and China might end up being the first deal of its kind, and the last. On Friday, President Trump reiterated that the administration could not possibly strike deals with every country, and that tariff announcements would be made over the next two to three weeks.
Some other countries may slip in there within that time frame with a deal – most likely are India, Japan and/or South Korea. But others will see their tariff rates range between the 10% baseline tariff up to as high as 50%, Trump said in a press conference during the UK deal.
“For some countries, we won’t make deals,” President Trump said. “We will just place tariffs of 10% or 50% or whatever they may be.”
Worth noting, Goldman Sachs analyst Jerry Shen wrote in a note to clients last week that he expects the baseline tariff rate to go from 10% to 13.5%. That’s hardly a protective tariff, but it signals that the administration remains serious about using tariffs to fund a government failing to lower its spending at the risk of higher taxes next year once the ‘Tax Cuts and Jobs Act’ expires. Higher taxes on businesses of all sizes would lead to further outsourcing.
Should the Trump Administration keep the Asian and European Union tariff rates at the current 10% level after a 90-day pause in the reciprocal tariffs, then domestic manufacturers will have to rely on Section 232 and Section 301 tariffs for protection.
The UK Deal: What We Know
Trump announced his first trade deal on May 8 and the biggest takeaways during the hour-long press conference were that the 10% tariff is non-negotiable, and that the UK has agreed to be a part of the U.S. economic security umbrella. This is what remapping global supply chains and geopolitics looks like in 2025.
Sitting behind his desk in the Oval Office with Commerce Secretary Howard Lutnick over his right shoulder and USTR Ambassador Jamieson Greer over his left, he called Great Britain “one of our closest and most cherished allies.”
UK Prime Minister Kier Starmer, who appeared via speaker phone, said that Washington and London have long worked together on matters of national security. But this deal marked the beginning of adding economic security to national security. The agreement squarely puts the UK under America’s economic security umbrella, and it brings the UK closer to the orbit of the U.S. economy.
“This is a real tribute to the history we have in working so closely together. Howard and Jamieson did a very good job to bring in this deal together,” Starmer said, calling it “a really important deal. It will protect jobs, create jobs and open market access.”
The deal includes market access for agriculture, led by beef, our biggest agricultural segment. Local beef production is in decline due to import penetration so it remains to be seen if this new import quota of 13,000 metric tons is even a little of a lifeline. That’s because in return for this new access, UK beef exporters also get 13,000 tons that were once allotted by the U.S. to other countries; this is not a new 13,000 tons of duty free beef allowed in, for example.
UK ranchers are taking away from others, even though those other countries, such as Brazil, who regularly blow past their quota limit, with importers happy to pay the 25% tariff.
In addition, the UK “will reduce non-tariff barriers” and will fast track American goods through their customs process for a quicker form of approval and less red tape. The U.S. will in turn do the same for UK goods. Tariffs on “row crops” like corn were reduced to zero, though it is unclear if the UK farmer got zero tariffs as well on those, or other agricultural items. The UK has allowed for a new tariff rate quota on 1.4 billion liters for corn ethanol. This could keep some farm state Senators in the U.S. happy.
The U.S. will allow in 100,000 cars at a 10% tariff, going to the Section 232 rate of 25% thereafter. The top cars exported from the UK are Jaguar and Land Rover models, followed by MINI Coopers. This volume is equal to what the U.S. imported from those car companies last year, only now they will be subject to the 10% tariff. Trump and Lutnick each said that this will protect high-paying jobs in the UK, so this seems more like a gesture of goodwill towards a country in which the U.S. actually has a trade surplus.
Trump admitted that Jaguars would “never be made in the U.S.” and that his target for the Section 232 tariffs were mass-consumption cars. However, the MINI models are mass-market vehicles and they will now have a lower tariff than similar four door cross-over vehicles coming from Asia and the EU. This could be a sticking point in trade negotiations, though for now it could be that the UK is getting a better deal on the Section 232 tariff only because there is more balanced trade between the two. The same cannot be said for any other auto producer.
Section 232 also got whittled down for UK steel, an industry in dire straits. The U.S. said that they can export duty free under the old quota system from the Biden administration “dependent on the nature of ownership of the relevant production facilities.” Imports of hot and cold rolled steel have been in decline since 2018. But in 2023, with the quota system in place, the U.S. imported 6,468 metric tons of steel tubes and pipes valued at $44.8 million, up from 4,519 tons valued at $23.7 million in 2018, based on World Bank data.
For some, the UK negotiations on Section 232 tariffs generate some uncertainty over future concessions. If these are negotiated away, they will have an immediate effect on the investments the Section 232 action was meant to encourage, and Washington will see increased calls from other trade partners for the same treatment. Then we are back to poking holes in the Section 232 tariffs, a move that led the Trump Administration to re-impose them globally in the first place last month. More details will come out on this in the coming weeks.
Besides some 232 question marks, a prime example of how the UK becomes part of the U.S. economic security umbrella is the Rolls Royce deal. They make jet engines for Boeing. They were given duty free access, but in return for that Boeing allegedly is set to receive a nice deal with a British airline company. Again, it is unknown who will buy those Boeings with the Rolls Royce engines, but these U.S./UK made aircraft will result in higher sales for Boeing. Whether the UK makes a similar deal with France in the future is the wild card, of course.
Very important to note here is that this Rolls Royce/Boeing agreement comes at a time when Ryanair, a low cost airline in the UK, was courting China’s Boeing rival COMAC to purchase aircraft. This would have marked the beginning of the end for Boeing’s market share in Europe. COMAC’s growth would also lead British and American jet engine makers to set up shop in China if they want to do business with COMAC. This is one of the few advanced technology segments where the U.S. actually enjoys a trade surplus with the world.
The deal also adds more market access for U.S. made industrial machinery, and there were hints about working together on advanced semiconductors and technology. No specific products were announced, but presumably this brings the UK in line with how Washington wants to protect advanced chips manufacturing; and make sure UK rivals are not sourcing from China, for example, which is a potential death knell for U.S. chip makers as China is fast moving up the food chain in semiconductors.
Pharmaceuticals from the UK may yet get preferential treatment, but this depends on the Section 232 investigation, the White House said in a statement. There is a sense from that statement that these deals on pharma, similar to steel, are contingent on who owns the lab, and where they are getting core components, such as active pharmaceutical ingredients used in medications. This is all a work in progress and may not be as complete as we think.
Lastly, President Trump also hinted about shipbuilding, suggesting the two countries will join forces and work together to build commercial vessels. This sector is almost entirely Asian shipbuilding now. “We used to build ships and we eased up on that, and we are going to work together on this,” Trump said.
Rough transcripts of Lutnick, Greer and UK Ambassador Lord Peter Mandelson below:
Howard Lutnick: “The UK is a top 10 market for us. We have balanced trade with the UK for the most part. How do you open a market with balanced trade? Well, we opened up new market access for ethanol, beef, machinery, and more agriculture products, and that will create $5 billion in new opportunities. So how did we do this when they have never done it before, and we still have the 10% tariff on? They looked at markets that they were importing from and found a way to shift to give us access, too. We did a deal with them on automobiles and you know if you’re not building here, we charge you a 25% tariff. He agreed they could send one hundred thousand cars and pay a 10% tariff and that protects their car industry; for the UK auto industry, this is thousands of jobs that we agreed to help protect for them. For steel and aluminum, their steel market has been destroyed because of dumping and British Steel has been nationalized. They are going to do the same thing we did and put tariffs on other countries. They sell Rolls Royce engines to Boeing and we agreed to bring those in tariff free and they are going to announce a new Boeing purchase…but we are doing this together. You can work with us on cars, and on pharmaceuticals, if you have a supply chain that is secure and protects our national security. And we started these talks at 10% and we ended at 10%.”
Jamieson Greer: “We have shown that it is time to change the way we do trade. People said we couldn’t charge a global tariff; we charged it and we kept the global tariff. So we made a deal and we agreed to have tariffs.”
Lord Peter Mandelson said that Trump demanded more at the last minute on steel, hinting that he convinced them to impose tariffs similar to our own. “If we are going to rebalance trade, we are better doing this together than separately and we are on a mission to do that. You did what you said you would do. You told the Prime Minister that you would do a good deal with the UK and do it fast and that we would be first and you kept your word. This is just the beginning. There is more we can do to reduce trade barriers to open up our markets even more to each other, but this provides us with a springboard to create a partnership between us—so we can harness science and technology to create future industries and future jobs just like we have done in national security and defense. We can do that in other endeavors now.”
The China “Deal”
The only real ‘deal’ in the China deal was a climbdown from the 145% tariff rates caused by China’s retaliation. Trump had imposed a 34% reciprocal tariff on China during “Liberation Day” and China retaliated with a similarly high tariff, leading Trump to match China’s retaliatory tariff rate. Those retaliatory tariffs were always the weak link in the tariff policy and were never going to stay, presuming China would eventually remove them out of fear of losing more of its manufacturing labor to outsourcing in India, Southeast Asia and Mexico.
The 34% reciprocal rate fell to 10%, meaning China essentially gets the 90-day pause treatment given to all of the other Asian manufacturing powers. This 10% stacks on top of the 25% Section 301 tariffs, and the 20% fentanyl tariff, so China now has a 55% tariff. Recall that everyone belly-ached over 25% tariffs against China back in 2018. Now those same people will be cheering China’s 55% tariff. Rates are even higher for certain industries, namely EVs and EV batteries, and solar.
China and the U.S. have agreed to what is essentially another go-round of the Bush/Obama-era Strategic Economic Dialogue (SED). We will see how far that goes, although if the past is any indicator, this new agreement to talk about balanced trade will likely go nowhere with China. And yet still, China’s manufacturing economy is dependent on U.S. buyers. And the Trump Administration is telling China that a strategic decoupling is underway, especially in core goods. To achieve this, high tariffs on China will not be enough as Chinese manufacturers can either set up shop in Southeast Asia, or hire contract manufacturers there to maintain low-cost producer access to the U.S. If Vietnam’s tariffs remain at 10%, for example, with China at 55%, Vietnam will become an even bigger investment destination for U.S. capital and for Chinese companies who do not want to lose market share. That will keep their businesses attractive to the big U.S. importers.
Trump Says 10% Tariff Here to Stay
Although the White House never overtly came out and said that the 10% tariff was non-negotiable, the U.S./UK deal clearly shows that it is. When asked by a reporter if the 10% tariff will ever come off, President Trump said, “No. That’s a very low number. That’s a good deal. The template of 10% is the lowest tariff.”
Global 10% Tariffs on U.S. Imports Would Raise Incomes and Pay for Large Income Tax Cuts for Lower/Middle Class
Read More »USDA Secretary Brooke Rollins said she thinks the UK deal will “exponentially increase our beef exports,” something that has rarely happened even on free trade deals. CPA economist Andrew Rechnenberg noted during last week’s CPA Annual Meeting in Washington that major U.S. agricultural surplus products like corn and wheat still have stagnant or declining export volume, and this includes sales to free trade partners.
Local British reporters seemed most curious about agriculture. And to close out the press conference, a reporter whined about rising prices because of tariffs. “Tariffs are misunderstood,” Trump responded. “Oftentimes the company picks up the cost, or the importer picks it up. But if Ford pushes higher prices onto customers they’ll just sell less cars,” he said.
Inflation indicators from April showed a decline from March. Inflationary conditions implied by business and consumer surveys have not yet played out in the data and are unlikely to do so in any big shocking way in the months ahead.
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