US trade deal set to save British economy £6.5bn

Sir Keir Starmer’s historic trade deal with the US will save the UK economy 6.5bn in harm from Donald Trump’s tariffs, The Independent can reveal.

- ALICJA HAGOPIAN KATE DEVLIN

The agreement, hailed by the prime minister as a "boost for businesses" that would save thousands of British jobs, was the first to be confirmed with any country since the president’s sweeping tariffs caused market turmoil last month.

Under the full slate of levies, the UK would have taken a £10.8bn hit to the economy by 2030, while 137,000 jobs would have been lost or under threat, analysis by economists at the University of Birmingham found.

Now, with tariffs on cars slashed from 27.5 per cent to 10 per cent and taxes on steel removed entirely, the deal will soften the blow by half and affect 59,000 jobs, researchers Dr Huanjia Ma and Dr Matt Lyons said.

“Our initial estimate shows that the new UK-US trade deal, while still leaving the UK worse off than in a no-tariff scenario, could more than halve the total negative impact on GDP from £10.8bn to £4.3bn,” Dr Ma told The Independent. “This mainly reflects smaller shocks to the automotive sector and the removal of beef, steel and aluminium trade barriers.”

The researchers’ analysis assumes that the cost of tariffs will be passed onto customers, and accounts for a 1.5 per cent price variation based on product demand for cars, and 0.4 per cent for everything else. The new estimates include both changes to automotive tariffs – assuming all UK car exports face a 10 per cent tax – and the additional exports resulting from the removal of tariffs on beef, steel and aluminium.

The deal comes hot on the heels of the UK’s long-awaited trade deal with India, which was signed on Tuesday after years of negotiations. That is expected to increase the UK’s GDP by £4.8bn each year by 2040, with trade between the two countries projected to increase by £25.5bn each year.