Donald Trump has effectively outmaneuvered Keir Starmer.

Donald Trump has effectively outmaneuvered Keir Starmer.

For the UK, this isn't a victory. In fact, it barely qualifies as a trade deal. It's at best a small relief from the US president's ongoing trade war.

On the 80th anniversary of VE Day, the UK-US alliance is back in the spotlight. Sir Keir Starmer has negotiated a trade arrangement with Donald Trump—a scenario few would have anticipated just a year ago—transforming the chaos of April's "Liberation Day" tariffs into what he frames as a significant opportunity for Britain.

The UK, rather than the EU, is receiving priority for a "full and comprehensive" trade deal. Take that, Obama. That's certainly the narrative Sir Keir Starmer will try to promote. Once one of the most prominent Remainers, he has reinvented himself as a savvy Brexiteer, securing agreements with both India and the US during his initial year in office.
However, it's important to take a more measured view at this juncture. The tariffs introduced in April were poised to be extremely harmful, and limiting their impact is indeed a positive outcome. Nonetheless, we are still in a much worse position than we were back in March. The "trade deal" revealed today is rather insubstantial.

It does not eliminate all the tariffs imposed this year, nor does it come close. The UK has managed to negotiate a reduction of the additional 25 percent tariff on 100,000 cars annually and on auto components down to 10 percent, while also eliminating tariffs on steel and aluminum. This is a positive development, to be clear. However, every other incremental tariff—including the baseline 10 percent—remains intact. Thus, the tariffs facing our exporters trying to penetrate the US market are still significantly higher than they were just a few months prior. In practical terms, this translates to the UK being billions of pounds worse off. By analyzing data on UK exports by subcategory, US tariff rates, and trade elasticities, I have derived a rough estimate of the deal's implications.

While not precise—due to the constraints of time—I have made informed decisions about which tariffs impact which categories. With that context, my preliminary calculation suggests that the April tariffs would have reduced UK exports to the US by approximately £12.4 billion, with the value of those goods declining by about £250 million. Not all of this would directly affect GDP—some trade would possibly be redirected—but it certainly represents a setback. The deal regarding beef is largely inconsequential, with the UK exporting around just £3 million per year. Today's agreement provides only minimal cushioning. Cars and auto parts form a significant part of the UK's exports to the US, so there is some positive impact. Nonetheless, the net effect is that due to decreased export volumes and prices, we are likely to be around £9.5 billion worse off than we were previously. In return, we have decreased existing tariffs on American beef and seemingly agreed to procure $10 billion worth of Boeing aircraft, in one form or another. For Donald Trump, this is a clear win in negotiations. He has reduced tariffs likely initiated to compel other nations to comply, providing a false resolution to an artificial crisis. In exchange, he has secured meaningful concessions from Downing Street. For the UK, though, it hardly represents a success. This isn't truly a trade deal; it's partial relief at most from Trump's trade war.

While the President touts this arrangement as "an incredible deal for the future," the likelihood of advancing it into a full-fledged trade agreement appears slim, particularly with the Prime Minister concentrating on resetting relations with the EU, which limits his ability to offer the regulatory concessions necessary for a more comprehensive agreement with Washington. The outcome is that British exporters are not merely striving to maintain their position; they are running hard yet still sliding backward.