10% tariffs are here to stay

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10% tariffs are here to stay

President Donald Trump listens as Prime Minister Keir Starmer of Britain speaks to him on the speaker phone in the Oval Office at the White House on May 08, 2025 in Washington, DC.

Anna Moneymaker | Getty Images

The U.K. and U.S. agreed to a landmark trade deal on Thursday — yet the agreement appears to be far from free of tariffs.

The deal is the first made by the United States since President Donald Trump unveiled his so-called reciprocal tariffs on countries around the world last month.

The United Kingdom’s position as one of a handful of countries where the U.S. boasts a trade surplus in goods — meaning the U.S. exports more to the U.K. than it imports — put the country at the front of the ****** for officials to broker an agreement with the Trump administration.

However, even Britain, with its “special relationship” with the U.S., didn’t manage to persuade Trump to drop all tariffs during trade talks.

Under the deal, the U.K. can export

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each year at a 10% rate, with any additional vehicles facing 25% duties. British steelmakers and the aluminum industry will be able to export tariff-free, down from the 25% rate that the U.S. imposed in February.

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However, all other goods imported to the U.S. from the U.K. will still be subject to a 10% baseline tariff — which Trump says is the lowest country-specific tariff that will be applied to trading partners.

Trump also suggested the deal is likely to be rare due to the two countries’ balanced trading relationship and close political ties — meaning it’s unlikely any country will be tariff-free under his second administration.

Asked if the 10% baseline tariff is a template for future trade deals, Trump said: “That’s a low number.”

“They made a good deal,” he added. “Some will be much higher because they have massive trade surpluses.”

Analysts took that to mean that tariffs of 10% at the very minimum are the best deal other countries and trading blocs could achieve.

“The details of the US-*** deal suggest that the US 10% baseline tariff is likely to remain in place for other trading partners with virtually no exceptions, but signals more flexibility than expected on sectoral tariffs,” said Jan Hatzius, chief economist and head of global investment research at Goldman Sachs.

JPMorgan’s U.S. Economist Abiel Reinhart also noted that “the chances that a rate of at least 10% on most goods across most countries could be maintained this year,” in a note to clients.

However, Reinhart pointed out that the carve-outs the United Kingdom secured for its auto, steel and aluminum sectors indicated the U.S. may be willing to cut bespoke — yet narrower in scope — deals with other nations.

“This has been a key sticking point in recent trade discussions with Japan, given the importance of its auto sector,” Reinhart added. “But it’s also possible that the US was more willing to make concessions with the *** on autos given that the *** only accounts for about 2.5% of US imports of vehicles and parts. By contrast, Japan accounts for close to 12%.”

However, Rella Suskin, equity analyst and autos expert at Morningstar, pointed out that the deal to reduce tariffs on only 100,000 cars effectively capped the market share of many of Britain’s largest automakers, including ***** Motors-owned Jaguar Land Rover.

Instead, it would benefit automakers such as BMW that import auto parts tariff-free and assemble vehicles in the U.S., according to Suskin.

“The limitation of the benefit of the *** being able to export 100 000 cars annually to the US at a 10% tariff means that Jaguar is unable to take any market share from a “preferential” tariff relative to European automakers,” Suskin said.

Andrew Hood, head of international trade at European law firm Fieldfisher and former advisor to British Prime Minister David Cameron, said the deal did more to support “the wider ***-US relationship” than help smooth trade between the two countries.

“It is notable that the deal is far more restricted than most Free Trade Agreements. It does not undo the 10% tariffs recently applied by the Trump Administration,” Hood said. “Rather, the deal focuses on supporting particular sectors, notably the automotive industry, ethanol producers and the steel and aluminium manufacturers where tariffs have been substantially reduced or eliminated.”

As damaging the residual 10% tariffs could be for the U.K., others point out the deal could dent U.S. economic growth too.

“While exemptions will nibble away at the effective tariff rate, with the baseline 10% not going anywhere, the average US tariff is still set to remain in double digits, which will deliver a big hit to real incomes in the US which will cause growth to slow sharply in the second half of the year, ” said Michael Pearce, deputy chief U.S. economist at Oxford Economics.

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#tariffs #stay

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