US President, Donald Trump and UK Prime Minister Keir Starmer on Thursday announced a landmark trade agreement.
Trump described it as a “breakthrough deal” during a statement from the Oval Office.
The deal is the first major trade agreement since Trump reintroduced broad tariffs earlier this year, igniting renewed global trade tensions.
“It opens up a tremendous market for us,” Trump said.
Under the deal, the U.S. will keep a 10% tariff on UK imports.
Meanwhile, the UK has agreed to lower its tariffs from 5.1% to 1.8% and will provide broader access for US goods.
The status of the 10% “baseline” tariff is still unclear, along with a threatened tariff on pharmaceuticals. That could pose risks to British companies like AstraZeneca and GSK.
“This is a really fantastic, historic day,” Starmer said via teleconference.
Investors have been pressuring the US to ease trade tensions. Since Trump returned to the White House in January, his administration has introduced a sweeping 10% tariff on most countries, effective April 2.
The US has also imposed 25% tariffs on autos, steel, aluminum, and goods from Canada and Mexico. China has been hit with a staggering 145% tariff.
US and Chinese officials are scheduled to meet in Switzerland on Saturday to continue negotiations.
The UK economy has been under stress, and the tariffs have added pressure on Starmer’s government.
Jaguar Land Rover temporarily paused U.S. shipments.
The UK also had to take emergency control of British Steel to keep operations running.
While negotiating the deal, the UK refused to weaken its food safety standards, which remain aligned with the EU.
However, the UK farming union acknowledged that US producers avoiding growth hormones or antimicrobial washes might gain market access.
News of the deal gave a boost to British markets. Shares in Aston Martin jumped 10%.
Retailers with US operations—such as JD Sports and Primark’s owner AB Foods—also saw stock increases.
Starmer’s government is trying to strengthen trade ties with the USa, China, and the EU without leaning too far in any direction.
Economists say the immediate economic benefit will be limited. However, they agree deals like this support long-term growth.
Earlier this week, the UK also concluded a free trade agreement with India.
There are political risks at home. The government remains unpopular, and any move seen as favoring large tech firms could be costly.
The UK’s digital services tax, introduced in 2020, imposes a 2% charge on the UK revenue of tech giants like Amazon and Google.
It’s expected to raise £800 million ($1.1 billion) this year.
But companies have passed the cost to consumers through higher ad fees and seller charges.
“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,” said a FTSE 100 CEO, who spoke on condition of anonymity.
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