LONDON — It’s not exactly the full-fat free trade agreement with the U.S. that the U.K. envisioned after Brexit. But given the circumstances, it will bring some relief to British industry. 

On Thursday Britain’s Labour government earned itself fresh bragging rights when it secured an economic agreement with the U.S., a mere days after sealing a much-anticipated — if controversial — free trade deal with India.  

Dialling into a White House press conference, U.K. Prime Minister Keir Starmer described the deal as “historic.” 

“This is going to boost trade between and across our countries,” he said. “It’s going to not only protect jobs but create jobs, opening market access.”  

While the “reciprocal” tariff rate of 10 percent on British goods remains unchanged, the U.K. will benefit from exemptions for steel and cars, as well as increased market access for agricultural exports. The deal also leaves room for further negotiation down the line.

“The final details are being written up in the coming weeks,” U.S. President Donald Trump told reporters from the Oval Office. Both Washington and London published initial details Thursday. 

While the agreement falls far short of a comprehensive free trade deal, the U.K. is the first country to agree to such a deal with Trump, one of the world’s toughest and most unpredictable negotiators.

But like any deal, it comes at a cost, with compromises made on both sides — and some concessions may prove too difficult to digest for even the most ardent Atlanticists.  

Meanwhile, as Brits pore over the details of the deal, there will also be questions over what isn’t included.   

Tariff reduction on cars and steel

The most significant change is a carveout from the universal additional 25 percent U.S. tariffs on steel, aluminum and cars. 

Under the deal, tariffs on British car exports will reduce to 10 percent and apply to a quota of 100,000 cars annually, which No. 10 says is “almost the total the U.K. exported last year.” Any additional vehicles will be subject to a 25 percent levy.  

But it’s still a far cry from the tariff rate the U.K. enjoyed before Trump’s second presidency, which at 2.5 percent was just a quarter of the reduced rate. 

Nevertheless, the reduction in tariffs will provide some much-needed relief to British carmakers, which exported £9 billion last year — making them the U.K.’s largest goods export to the U.S.

Meanwhile, the deal completely removes tariffs for the U.K.’s beleaguered steel industry, which is facing a crisis amid the threat of blast furnace closures and job losses. The U.S. is currently the U.K.’s second most important export market for steel after the EU, with the American market accounting for 9 percent of U.K. steel exports by value and 7 percent by volume.

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The U.S. has also promised exemptions for U.K. aerospace parts, with the U.S. receiving preferential access to U.K. aerospace components. 

“We’ve agreed to let Rolls Royce engines and those kind of plane parts to come over tariff-free,” said U.S. Commerce Secretary Howard Lutnick in the Oval Office. 

Initially, aerospace parts were explicitly included in the general 10 percent reciprocal tariff, even those previously exempted due to safety considerations. 

No digital service tax reduction 

It came as a surprise to many when Britain refused to budge on its digital services tax, despite U.S. pressure to lower it. 

The 2 percent duty targets the revenues of tech giants like Amazon, Meta and Google, and is estimated to raise £800 million this year. It has long drawn anger from the U.S., which argues it discriminates against American companies. 

But the tax remains unchanged as part of the deal, as POLITICO first reported on Thursday. 

Instead, both countries have agreed to work on a digital trade deal to strip away paperwork and streamline customs procedures for exporters. The tech deal will also collaborate further on areas including biotech, life sciences, quantum computing, nuclear fusion, aerospace and space. 

There is also no concession on Britain’s online safety rules, much to the relief of campaigners. 

The U.K. government previously sparked outrage when it signaled last month that a review of online safety rules was on the table in trade talks with the U.S. following pressure from Washington.

U.K. Ambassador to the U.S. Peter Mandelson told POLITICO he was “very happy with the outcome,” adding that Britain “secured all [its] main asks and the agreement will now open the door to a deeper long-term U.K.-U.S. technology partnership.” 

Beef access and ethanol

In a move greeted with suspicion by the U.K. farming lobby, the countries have agreed new reciprocal market access on beef, with U.K. farmers given a tariff-free quota for 13,000 metric tonnes at a reduced tariff rate of between 4 and 10 percent. 

Meanwhile, U.S. farmers will be able to export the same quantity of beef tariff-free to the U.K. 

Crucially, however, any imported meat must comply with U.K. food standards, meaning British farmers can breathe a sigh of relief that hormone-treated beef won’t be darkening their doors anytime soon. Food standards have been a hot potato since U.K.-U.S. negotiations on a free trade agreement kicked off under the first Trump administration in May 2020. 

In a surprise move, the U.S. was also granted a new tariff-free quota for ethanol, applying to the first 1.4 billion liters. Previously, U.S. ethanol imported to the U.K. was subject to a tariff of between 10 and 50 percent depending on its use. 

Speaking at the White House press conference, Trump said the deal would “dramatically” increase access for American beef, ethanol and “virtually all the products produced by our great farmers.”

According to White House documents, the deal will create a “$5 billion opportunity for new exports for U.S. farmers, ranchers, and producers,” including more than $700 million in ethanol exports and $250 million in other agricultural products, like beef.

“Our biggest concern is that two agricultural sectors have been singled out to shoulder the heavy burden of the removal of tariffs for other industries in the economy,” said National Farmers’ Union President Tom Bradshaw, adding U.K. agriculture “cannot continue to shoulder such imbalances in future negotiations.” 

He added that the inclusion of bioethanol in the deal “raises concerns for British arable farmers. We are working through what this means for the viability of the domestic bioethanol production and therefore the potential impact on our members.”   

The White House said the countries have also committed to work together to enhance industrial and agricultural market access.

Preferential treatment on pharma

The deal also sees the U.K. be able to negotiate a preferential outcome to pharmaceutical tariffs down the line, though the U.S. has not imposed duties on drugs yet. 

Pharmaceuticals are the U.K.’s second largest export to the U.S, with Britain exporting £6.6 billion last year, worth 11.1 percent of its total exports to America. 

Trump announced on Tuesday he would impose tariffs on the sector “over the next two weeks,” having launched an investigation into the national security implications of pharma imports on April 1. 

A big unknown

It’s not yet clear whether Britain will be given preferential treatment to Trump’s future tariffs on the film industry. 

Over the weekend, the U.S. president shocked the movie industry after threatening to slap 100 percent duties on foreign films, warning that incentives other countries offer to attract filmmakers to their shores presented a national security threat to America. 

Culture Committee Chair Caroline Dinenage warned that tariffs on films “is not in the interests of American businesses” due to “their investment in facilities and talent in the U.K., based on U.S.-owned IP.” 

Trade Secretary Jonathan Reynolds said: “At this stage, it [is] unclear what the U.S. was proposing exactly to tariff in relation to films.”