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Tariffs

US and UK Announce Economic Prosperity Deal: A New Framework for Bilateral Trade

Strategic Insights

— 1 min read

US President Donald Trump and UK Prime Minister Kier Starmer announced an agreement on the General Terms of the Economic Prosperity Deal (EPD) between the United States and the United Kingdom on 8 May 2025. Although not a binding agreement, the EPD aims to enhance economic cooperation and promote reciprocal trade between the two countries, including the expansion of US market access to the UK and the elimination of non-tariff barriers on US products. The EPD is the first trade framework announced by President Trump since his "Liberation Day" proclamation imposing significant reciprocal tariffs globally on 2 April 2025.

Key Takeaways:

  • The EPD has three core objectives: to enhance mutually beneficial trade, remove trade and investment barriers, and strengthen the "Special Relationship" between the two countries.
  • The United Kingdom will commit to removing its current 20% tariff on US beef exports, creating a duty-free quota of 13,000 metric tons for US beef exports, and offering a preferential duty-free tariff rate quote (TRQ) of 1.4 billion liters for US ethanol export.
  • The United Kingdom will also purchase US$10 billion worth of US aircraft, and the United States will reduce the current dutiable rate on UK automotive imports from 27.5% to 10% for a quota of 100,000 vehicles annually.
  • Both countries will negotiate mutual preferential treatment on pharmaceuticals and pharmaceuticals pending the outcome of an ongoing Section 232 investigation in the United States.
  • A 10% reciprocal tariff announced on 9 April 2025 will remain in effect.
  • The EPD will establish a series of mutual actions and negotiations to improve bilateral market access and strengthen bilateral trade, including increased cooperation in agricultural markets, streamlined customs processes, and strengthened cooperation on economic security.

Statistics:

  • 13,000 metric tons: US beef export quota free from duty
  • 1.4 billion liters: US ethanol export TRQ
  • 100,000 vehicles: Annual quota for reduced-dutied UK automotive imports
  • US$10 billion: Value of US aircraft to be purchased by the United Kingdom
  • 20%: Current UK tariff on US beef exports
  • 27.5%: Current US duty rate on UK automotive imports
  • 10%: Reciprocal tariff on UK goods
  • US beverages will be exempt from the 27.5% tariff.

Sources:

*

  • Mondaq Ltd
  • White House
  • UK Government

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