The UK has five weeks to finalize a trade agreement with the US concerning tariffs on steel and aluminum exports.

This follows a temporary exemption from a 50% tariff granted by President Donald Trump, allowing British exports to avoid the higher levy during negotiations.

Despite this exemption, the White House retains the right to impose the higher tariff if the UK does not meet the terms of the agreement.

This situation keeps British steel and aluminum exports at risk of increased tariffs as discussions continue.

The agreement, announced last month by Trump and Prime Minister Keir Starmer, aimed to remove an earlier 25% US tariff on British steel.

However, unresolved issues, including the timeline for implementing tariff relief, have put pressure on UK trade negotiators.

.source-ref{font-size:0.85em;color:#666;display:block;margin-top:1em;}a.ask-tia-citation-link:hover{color:#11628d !important;background:#e9f6f5 !important;border-color:#11628d !important;text-decoration:none !important;}@media only screen and (min-width:768px){a.ask-tia-citation-link{font-size:11px !important;}}

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ The UK’s post-Brexit trade vulnerability creates unique pressure

The UK’s rush to finalize this deal highlights its precarious position in post-Brexit trade negotiations, where it lacks the collective bargaining power it once had within the EU.

Britain became the first country to settle with Trump on the steel tariffs, with Starmer’s government promising the deal would save an industry described as being on the “brink of collapse” 1.

This negotiating position is particularly challenging for the UK steel industry, which is already battling against global overcapacity, depressed steel prices, and weak demand across industrial sectors 1.

The urgency is amplified by the fact that the US accounts for 7% of the UK’s steel exports (worth approximately £370 million in 2024), making this a significant economic priority for the British government 1.

Even with the temporary reprieve from the higher 50% tariff, UK steel producers warn that continued uncertainty may deter US customers from placing orders, demonstrating how tariff threats alone can disrupt trade flows 1.

2️⃣ Trump’s tariff strategy demonstrates consistent negotiating pattern

The current situation reflects Trump’s consistent approach of using tariffs as leverage in trade negotiations, a strategy he employed extensively during his first term.

The doubling of steel and aluminum tariffs to 50% for most trading partners follows Trump’s established pattern of citing national security concerns to justify protectionist trade policies 2.

These tariffs are explicitly framed as a response to what the administration perceives as unfair trade practices that threaten US industries, particularly focusing on the issue of global steel oversupply 3.

The selective application of tariffs, giving the UK a temporary reprieve at 25% while applying 50% to other nations, demonstrates how Trump strategically uses differentiated tariff rates to create pressure and incentives in bilateral negotiations 1.

This approach has consistently drawn criticism from allies like Canada and the EU, who argue these tariffs are unjustified and threaten to impose countermeasures, showing the potential for escalating trade tensions 2.

3️⃣ The broader economic costs of protectionist trade policies

Research indicates that while specific sectors like steel may see benefits from tariff protection, the overall economic impact is negative for both countries involved in trade disputes.

Analysis of tariff impacts shows that consumers ultimately face higher prices and fewer choices as manufacturing costs increase across sectors that rely on steel inputs, including automotive and construction industries 4.

The US International Trade Commission has noted that while tariffs may benefit domestic producers in the short term, they harm the broader economy by increasing prices across multiple sectors 3.

The interconnectedness of global supply chains means these tariff disruptions have far-reaching consequences beyond the immediate steel industry, potentially affecting manufacturing efficiency and competitiveness 4.

These economic realities create significant political pressure on both sides to resolve the dispute, explaining why the UK government is working intensively to implement the deal despite challenging conditions 5.

……