UK autos exempted under U.S. tariff cut but steel still in question

June 30, 2025 (MLN): The U.K.-U.S. trade deal takes effect on Monday, granting British cars a preferential tariff rate upon entry into the American market, though questions remain regarding the final tariffs on U.K. metal exports.

In May, the U.K. became the first country to secure a trade deal with the U.S. following President Donald Trump's introduction of reciprocal tariffs a month earlier. The agreement comes into force on June 30.

Under the new terms, a blanket 10% tariff now applies to all U.K. goods imported into the U.S, as per CNBC.

The deal also stipulates that the first 100,000 U.K.-made vehicles exported to the U.S. annually will face a 10% tariff, while any additional units will be subjected to a 25% import duty.

Data from the Society of Motor Manufacturers and Traders (SMMT) shows that approximately 102,000 cars made in the U.K. were exported to the U.S. last year.

Mike Hawes, CEO of the SMMT, described the agreement as “a huge relief for the U.K. automotive companies that export to this critically important market.”

He noted that the deal “immediately slashes the punitive tariffs that brought the U.S. export market to a standstill and threatened the viability of some of the most famous names in British manufacturing.”

The U.S. maintains a trade surplus in goods with the U.K., exporting more than it imports. Cars are the U.K.’s largest export to the U.S., with the U.S. being the top global destination for British vehicles, accounting for 27.4% of all U.K. car exports last year.

The 10-25% tariff range under this deal is significantly lower than the 50% tariff imposed on vehicles from other U.S. trade partners. The agreement also eliminates duties on exports from the U.K.'s aerospace sector.

However, the U.K. is still negotiating reduced tariffs on key industrial metals.

Currently, it is the only country with a preferential 25% tariff rate on steel and aluminum exports to the U.S., compared to the 50% rate for other nations.

Both governments have discussed reducing steel tariffs to 0%.

The U.K. government stated on Monday, “We will continue go further and make progress towards 0% tariffs on core steel products as agreed.”

Negotiations are complicated by the U.S.'s “melt and pour” rule, which defines U.K.-origin steel as only that which is melted and poured in Britain.

This rule affects many semi-finished products processed at Tata Steel’s Wales plant, which sources inputs from countries like India and the Netherlands.

Steel market analyst Jon Carruthers-Green of MEPS International noted that Tata is unlikely to stop sourcing from abroad, suggesting that broader industry deals might be the only solution.

Trump’s tariff announcement had initially triggered a spike in U.S. steel prices, which remain high despite recent declines.

“Asia and Europe are still dealing with overcapacity, which has depressed prices in Europe, which means the steel industry is really struggling,” Carruthers-Green added.

U.K. Prime Minister Keir Starmer on Monday called the trade deal “historic,” emphasizing that it is “safeguarding key industries that are vital to our economy” and protecting jobs.