WHY US TRADE DEAL WON’T MAKE YOU RICHER, ACCORDING TO EXPERTS

The trade deal agreed with the US will be “trivial” for UK growth and inflation, according to leading economists.

Announced on Thursday afternoon, the deal between the two countries will see 25 per cent tariffs – import taxes – on UK cars sold in the US cut to 10 per cent for the first 100,000 vehicles.

Steel and aluminium tariffs will also be reduced and, in return, the UK will cut its own tariffs on US beef and allow more market access for other products too.

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Lower tariffs from the UK theoretically means goods can be imported more cheaply and prices cut for UK consumers, while lower tariffs from the US would be expected to provide a boon to UK-based companies that sell to consumers in the States.

But although experts say the agreement could help some individual industries, they add it will not make a “big difference” to the UK economy as a whole, and that the UK is unlikely to experience higher growth.

Achieving higher growth has been a key aim of Sir Keir Starmer and Chancellor Rachel Reeves because it can boost jobs and pay, making people feel better off.

Cutting inflation also increases the money in people’s pockets.

Boost to the UK economy ‘ likely to be minimal’

In an analysis of the agreement, Paul Dales, chief UK economist at Capital Economics, said the deal “won’t make a big difference to the UK economy as a whole”.

He said the initial tariffs applied on UK exports in March and April “wouldn’t have reduced UK GDP by much more than 0.1-0.2 per cent” and that following that logic, “this UK-US trade deal doesn’t dramatically improve the UK’s economic prospects”.

He said the impact on UK price rises would also be negligible, and that Capital Economics would not be updating its growth forecasts.

Similarly, Thomas Pugh, an economist at RSM UK, said: “The boost to growth to the whole economy from the reduction in tariffs is likely to be minimal. Indeed, the UK is still in a significantly worse position than just a few months ago.

“The announcement that 100,000 UK cars can enter the US with a 10 per cent tariff, which is roughly how many cars the UK exported to the US last year, will be a big relief to UK automotive manufacturers. Similarly, the removal of tariffs on steel and aluminium will support a struggling metals industry, as will the exemption of aircraft engines.

“However, given we had thought that the additional tariffs on the automotive and steel industries would only knock off around 0.1 per cent from GDP and that the 10 per cent tariffs on automotives remain, the boost to UK growth will be marginal.”

He said that for now, he saw no reason to upgrade his forecast of 1 per cent growth this year.

Robert Wood, chief UK economist at Pantheon Macroeconomics, also said the deal was “trivial for UK growth and inflation” overall.

The Chancellor was handed a blow last month as the International Monetary Fund downgraded its forecasts for UK growth in 2025 from 1.6 to 1.1 per cent, and down to 1.4 per cent for 2026.

This came after the Office for Budget Responsibility downgraded the UK growth forecast for 2025 from 2 per cent to 1 per cent in March.

Meanwhile, inflation – the rate of price rises – is set to increase when the next reading is released later this month.

In its latest forecasts, released yesterday, the Bank of England said it is expected to peak in the third quarter of 2025, at an average level of 3.5 per cent.

This is down from previous forecasts of 3.7 per cent, partly due to cheaper goods being redirected to the UK from countries hit by US tariffs, but is still well above the target level of 2 per cent.

2025-05-09T11:23:54Z