UK/US Economic Prosperity Deal: What does it mean and where does it stand?

Origins and strategic rationale

The EPD emerges amid a volatile global trade environment marked by sharp tariff escalations under the US ‘Liberation Day’ regime. In April 2025, broad 25% tariffs were imposed by the US on steel, aluminium and related goods. In addition, 27.5% tariffs were imposed on automotives, prompting the UK to seek relief and carve out special status.

On 8 May 2025, the UK and US published the General Terms for the United States of America and the United Kingdom of Great Britain and Northen Ireland Economic Prosperity Deal (General Terms) for the EPD, outlining mutual commitments on the tariff cuts, market access, regulatory cooperation and sectoral negotiations. The UK government framed the deal as delivering immediate gains for exporters, protecting jobs and establishing negotiating platforms for deeper alignment in areas such as pharmaceuticals, automotive supply chains and industrial goods.

On 16 June 2025, President Trump signed Executive Order 14309 “Implementing the General Terms of the United States of America-United Kingdom Economic Prosperity Deal” (Executive Order).

In this article, we evaluate the deal’s promises and opportunities, and the challenges ahead for implementation and business stakeholders.

Tariff reductions

Automotives

Under President Trump’s Executive Order, US tariffs on UK automotives were reduced from 27.5% to 10% for up to 100,000 vehicles annually under a tariff rate quota (TRQ). Exports beyond that quota revert to the higher rate.

Aerospace and parts

The deal removes the 10% tariff on UK aircrafts and engine parts entering the US, giving UK manufacturers improved access.

Steel and Aluminium

Under the EPD, the US intended to establish quota arrangements at most favoured nation[1] (MFN) rates (then 25%) for UK steel, aluminium and certain derivative steel and aluminium products. Relaxed or reduced tariffs below MFN rates were contingent on the UK meeting US requirements on supply chain security and ownership of facilities exporting those materials. The security and ownership requirements are part of the US’s wider template for Section 232 (national security) review, applied in the EPD and being mirrored in talks with other counterparties, including the EU.

However, at the time of the EPD’s announcement, the UK government’s press release stated that the deal reduced tariffs on steel and aluminium to zero percent. This was followed by the White House’s announcement on 3 June 2025, that tariffs on all steel and aluminium imports would increase from 25% to 50%, but granted the UK a temporary exemption from the increase, reporting that the tariffs on UK steel and aluminium would remain at 25%. On 17 June 2025, President Trump signed an executive order that provided the UK with no immediate relief from the existing 25% tariff on steel and aluminium. As at the date of publication of this article, no further tariff relief on steel or aluminium has been granted to the UK.

Beef and Ethanol

Under the EPD, the UK will remove the 20% tariff on US beef imports under the existing quota shared between the US and Canada of 1,000 metric tonnes per year. Alongside this, the UK will create a preferential duty-free quota for US beef of 13,000 metric tonnes per calendar year. The General Terms confirm that the UK and US must comply with the importing country’s sanitary and phytosanitary standards (for ensuring the safety of trade in food, animals and plants), alongside other mutually agreed standards.

In addition, the UK will create a preferential duty-free quota for US ethanol of 1.4 billion litres per year.

Aerospace and pharmaceuticals

Certain UK aerospace goods will be relieved from tariffs under the EPD. The agreement also includes commitments to non-tariff barrier reduction, regulatory alignment and cooperation on standards/conformity.

For pharmaceuticals and pharmaceutical ingredients, preferential treatment is under negotiation, contingent on the US Section 232 investigations. Under US trade law, Section 232 of the Trade Expansion Act 1962 (Section 232) allows the US to investigate whether imports of certain goods threaten national security. A Section 232 review aims to ensure that the US maintains secure and reliable sources of pharmaceutical ingredients. In addition, the UK must demonstrate compliance with US supply chain security and ownership standards as outlined in the General Terms. These include ensuring that any UK facilities exporting pharmaceutical products to the US are free from ownership or control by entities of concern, such as those linked to jurisdictions under US sanctions. This follows recent reports suggesting that as part of the broader discussions arising from the EPD, the US government is exerting pressure on the UK’s National Health Service (NHS) to raise the prices it pays for pharmaceuticals supplied by US pharmaceutical manufacturers in expectation of their prices then potentially being reduced for drugs supplied in the US. This would include raising the National Institute for Health and Care Excellence (NICE) cost-effectiveness threshold by 25%. NICE is the UK body that provides guidance on which medicines and treatments are considered good use of NHS money. Raising the cost-effectiveness threshold, which is used by NICE to establish if medicine offers good value for money for the NHS, could lead to approval of more expensive medicines in the UK meaning higher expenditure by the NHS, without necessarily providing proportionate health benefits to UK consumers.

Opportunities for UK business

With the 100,000 vehicle quota and reduced tariff from 27.5% to 10% for cars within that quota, UK car manufacturers stand to recover competitiveness in the US market. This reduction in tariffs is reported prospectively to save Jaguar Land Rover hundreds of millions of dollars a year.

Certain UK aerospace products will be tariff exempt, easing cost pressures for UK aerospace firms exporting engines, airframes and parts, potentially opening opportunities for supply chain growth.

For steel and aluminium producers, provided compliance with US conditions, the UK metals sector could see large upsides such as reliefs from punitive US tariffs and new market access under quota terms. This would help preserve jobs and investment and follows events such as the April 2025 intervention by the UK government, where it took control of British Steel to save thousands of jobs in Scunthorpe and the UK government’s underwriting of a £1.5bn loan guarantee to Jaguar Land Rover, following a cyber-attack in August 2025. However, to assess the full opportunities available within the sector, clarity on quotas, ownership rules and supply chain audit are required.

Furthermore, US exporters will gain broader access to the UK market, most notably suppliers of beef and ethanol. In addition, the UK food processing sectors that rely on ethanol inputs will benefit from lower input costs.

Overall business implications

For UK businesses, the EPD represents a meaningful reset in transatlantic trade. Sectors such as automotives, aerospace and metals stand to benefit from early tariff relief or improved access. But gains depend heavily on implementation, meeting criteria, monitoring quotas and aligning regulatory compliance. In addition, beef and ethanol sectors may face acute disruption. The deal’s 1.4 billion litre duty free quota for US ethanol, a volume equivalent to the size of the UK’s domestic market, has prompted industry warnings that domestic UK plants could be undercut by low cost US imports, with some UK producers warning of potential plant closures. In contrast, the reciprocal 13,000 tonne beef quota offered by the UK to the US, is modest compared to total UK consumption and imports, yet UK farmers remain cautious about potential price competition and supply chain profitability. These developments illustrate that while the EPD opens opportunities for UK industrial exports, the UK’s beef and ethanol sectors may be more threatened by increased competition from US imports.

As UK Prime Minister Sir Keir Starmer stated, “This is jobs saved, jobs won but not job done and our teams will continue to work to build on this agreement.”

[1] The principle which ensures that countries treat each of their trading partners equally, promoting non-discriminatory trade practices in international trade, subject to preferential terms agreed under a wide-ranging free trade agreement.