US-UK trade deal shows tariffs are here to stay

The US trade deal announced with the UK focused on limited relief from autos and steel and aluminum tariffs, while the broader 10% universal tariff remained in place. While exemptions will nibble away at the effective tariff rate, the baseline 10% is not going anywhere.

What you will learn:

• This deal was low-hanging fruit, as the UK is 3% of US trade, the US runs a trade surplus with the UK, and the two countries have a long history of cooperation across other areas. In the event, the details point to a relatively modest agreement.
• We will not revise our US forecast based on the UK trade agreement announced on Thursday. Because the baseline 10% tariff was left untouched, it suggests tariff rates will be in the double digits for the foreseeable future. This will deliver a big hit to real incomes in the US, causing growth to slow sharply in the second half of the year.
• This trade deal was more important about what it signals for broader negotiations, so the limited commitments secured from the UK and the modest tariff relief offered in return will come as a disappointment to those expecting a major de-escalation.

Download the full report to learn more.