UK-US trade deal kicks into gear with tariffs slashed for UK car and aerospace sectors

Car manufacturers face 10% tariff and 100,000 quota as aerospace sector levy is removed entirely

New Land Rover cars are seen at the Jaguar Land Rover plant at Halewood in Liverpool, northern England. Reuters

A trade deal that reduces tariffs on British exports of cars and aerospace equipment to the US has come into force as the two sides continue to negotiate over steel duties.

London and Washington reached an agreement in May to cut US tariffs on cars from 27.5 per cent to 10 per cent, with a limit of 100,000 vehicles a year.

It also fully eliminated a 10 per cent tariff on goods such as engines and aircraft parts.

The deal was clinched after US President Donald Trump imposed import taxes as part of his “liberation day” tariffs on countries across the world.

“From today, British car and aerospace manufacturers will benefit from major tariff reductions when exporting to the US, saving thousands of jobs,” the UK Department of Trade said in a statement on Monday.

Prime Minister Keir Starmer said the “historic trade deal” delivers for British businesses and protects UK jobs.

“From today, our world-class automotive and aerospace industries will see tariffs slashed, safeguarding key industries that are vital to our economy.”

Chancellor Rachel Reeves speaks to workers at the Rolls-Royce factory in Derby, England in May. The engine maker is set to benefit from the US-UK trade deal. AFP

In return, Britain agreed to further open its market to US ethanol and beef. The UK government is due to update Parliament on Monday on those sectors.

The bioethanol industry says the deal has made it impossible to compete with heavily subsidised American products.

The UK’s largest bioethanol plant warned last week that it could be weeks from stopping production.

Hull-based Vivergo Fuels said the start of talks with the government was a “positive signal” but that it was simultaneously beginning consultation with staff to wind down the plant.

It has also raised concerns in the chemical industry and among British farmers, even though the meat would still have to meet UK food safety standards.

Mr Starmer and Mr Trumo finalised the deal for those sectors at the G7 summit, but levies on steel have been left at 25 per cent rather than falling to zero as originally agreed.

Talks are continuing to secure 0 per cent tariffs on core steel products from the UK.

The executive order signed by Mr Trump suggests the US wants assurances on the supply chains for UK Steel intended for export, as well as on the “nature of ownership” of production facilities.

“We will continue go further and make progress towards zero per cent tariffs on core steel products,” the trade department said in the statement.

Business and Trade Secretary Jonathan Reynolds said the deal would save hundreds of millions each year and safeguard thousands of jobs.

Kevin Craven, head of aerospace trade association ADS, said the sector “hugely appreciated” the efforts to reach a deal.

Society of Motor Manufacturers and Traders chief executive Mike Hawes said the agreement was “good news for US customers and a huge relief for the UK automotive companies that export to this critically important market”.

This deal is one of several international agreements the UK has secured recently, including a trade deal with India and a renewed EU deal.

Negotiations are also continuing for a GCC-UK trade deal. The two sides are “hard at work” on bringing the deal into place Britain's chief negotiator, Tom Wintle, said last week.