BBC
Donald Trump has won an agreement with the European Union, meaning that the US will not impose a 30% tariff (export tax) on EU imports threatened by the US.
However, the EU still faces new 15% tariffs on goods sold to the US.
This is higher than the 10% tariffs that the UK faces export of goods to the US as part of an early agreement between London and Washington.
So how does the EU deal compare to the UK? And are there any potential economic benefits that are currently accruing in the UK?
Most analysts believe that an agreement with the UK is more likely to determine that it is more advantageous for the UK than that with the UK will have the UK’s advantage.
However, they also emphasize that details of the final US EU agreement are important, and that there remains uncertainty about how the US will handle steel and pharmaceutical imports from the EU.
What is the difference between transactions?
In the face of that, a decline in the UK baseline tariff rate (10% vs. 15%) could provide advantages for UK-based companies and UK companies competing for sales to the US.
“In principle, the UK is in a better position than other countries, so it could potentially benefit from this,” Michael Gasorek, director of the Centre for Comprehensive Trade Policy (CITP), told BBC Verify.
However, there is complexity between the two contracts and they are not clarified to both, making them difficult to compare.
In the case of automobile exports, the UK and US contracts specify that automobile exports from the UK to the US face 10% tariffs.
However, the UK 10% rate applies only to quotas for 100,000 vehicles per year. This is almost the number of cars the UK is currently selling.
Each vehicle sold on that quota will be hit by a 25% tariff on US car imports, which is higher than the 15% tariffs faced by all EU car exports.
In 2024, the EU sold approximately 758,000 vehicles to the US. That year, almost seven times the UK exported to the US.
Getty Images
The UK and US contract also state that the UK will negotiate a contract to avoid future US tariffs on drug imports. However, the US has not yet imposed these specific tariffs, and it is unclear what the nature of the UK exception will be.
There is also a lack of clarity as to whether the US EU 15% tariffs will always apply to drugs. On Sunday, the US president suggested he would not do so, but EU committee chairman Ursula von der Leyen suggested.
Similarly, it is unclear whether existing US import duties are incorporated into the EU’s 15% baseline duties, or whether they will apply in addition to existing import duties, as in the case of the UK’s 10% duties.
The answer could affect the relative benefits of UK exports. If UK tariffs are “strapped” but not EU tariffs, the overall effective tariffs imposed on some EU goods could be lower than those imposed on some UK goods.
The text for the EU-US contract has not yet been published, so it is impossible to ensure at this stage.
How about steel?
British steel exported to the US is currently subject to 25% tariffs. This is lower than the 50% global rate for metal imports imposed by Donald Trump in June.
The President granted the UK this partial exemption to ensure time for the implementation of the US-UK trade agreement.
British officials are working with US counterparts to solve a technical problem that means that UK companies can export steel to the US up to a specific allocation that even this 25% tariff avoids.
Meanwhile, US authorities have explained that under the EU-US transaction, EU steel will be subject to US 50% tariffs on metal imports.
It appears to bring greater benefits to UK steel exporters compared to their EU counterparts when it comes to sales to the US.
However, the chairman of the EU Commission has also suggested that Brussels and Washington remain in discussions on the quota system, which will also result in lower rates of EU steel exports under quotas.
It could ultimately erode relative benefits for British steelmakers.
In theory, EU manufacturers could move some of their production to the UK in steel and other sectors to benefit from lower tariffs when exporting to the US
However, some analysts are skeptical of this possibility.
“I don’t think that modern supply chain companies will make major long-term relocation decisions based on differences in marginal tariffs,” said David Hennig, UK director of the European Centre for International Political and Economics (ECIPE).
“To take advantage of such differences in tariffs, companies need to reasonably ensure that differences continue. Given the uncertainty surrounding US trade policy, there is no certainty at the moment,” agrees Michael Gasorek.
What about the broader economic impact?
In 2024, the UK exported £358 million in goods and services to the EU, exporting 41% of all exports.
“The demand for EU exports from the US is likely to fall, and if that leads to a slowdown in the European Union, it would be bad for the UK as it would lead to a decrease in demand for exports from our biggest trading partners.”
And most economists hope that Trump’s tariffs will ultimately slow the growth of the US economy, which will also harm UK businesses to the US.
