A few days before the U.S.-China representatives were set to meet in Geneva, U.S. President Donald Trump made a high-profile announcement that he had reached a historic trade agreement with UK Prime Minister Keir Starmer. According to a statement on the White House website, the agreement provides American businesses with access to the British market and also strengthens U.S. national security, making it highly significant. The Trump administration stated that the deal opens up USD 5 billion worth of export opportunities for American companies and brings in USD 6 billion in tariff revenue. At the same time, the UK government announced on its official website that it had reached a milestone economic agreement with the U.S., which saved thousands of jobs in the country's automotive manufacturing and steel industries.
Prior to the negotiations, the U.S. had imposed baseline reciprocal tariffs of 10% on the UK, along with 25% tariffs on automobiles and 25% tariffs on steel and aluminum. Based on official documents and reports from media outlets, the contents of the U.S.-UK trade agreement indicate that, under the current trade framework, the U.S. has agreed to reduce tariffs on up to 100,000 UK-manufactured cars exported to the U.S. from 25% to 10%, a significant reduction. Secondly, both sides will open their agricultural markets. The UK will remove its 20% import tariff on U.S. beef and increase the import quota to 13,000 tons. In return, the U.S. will allocate 13,000 tons of its beef import quota previously available to other countries to the UK. Third, the U.S. will revise its tariffs on British steel and aluminum. According to a White House announcement, the two countries have established a new trade alliance for steel and aluminum products. The UK's official statement noted that British steel exports to the U.S. will no longer face tariffs.
Finally, the UK will reduce its tariff on ethanol imported from the U.S. to zero. Beyond the agreements on goods and tariffs, the U.S.-UK agreement also touches on service trade and cooperation on non-tariff barriers. According to the UK's official announcement, as part of the agreement, the current digital services tax will remain in place for now, but the two countries have agreed to jointly formulate a digital trade agreement, which will simplify procedures for UK businesses exporting to the U.S. The UK also stated that if tariffs are imposed on sectors such as pharmaceuticals in the future, the UK will receive "preferential treatment". Additionally, according to the White House announcement, the U.S. and the UK will strengthen coordination and cooperation on economic security, including joint responses to non-market policies from third countries.
It should be noted that the U.S.-UK trade agreement is, in fact, only a framework, and detailed negotiations will take much longer. Trump himself admitted that the final content is still being drafted, while UK government officials pointed out that negotiators will continue working to reduce tariffs not yet covered by the agreement.
After news of the agreement broke, all three major U.S. stock indexes extended their gains and closed higher, with the S&P 500 rising by 0.58%. In contrast, the UK's FTSE 100 index reversed earlier gains and closed down 0.32%. Judging from the performance of the British stock market, it appears that the UK domestic market was not impressed by the framework deal. Most British media outlets were also critical of the agreement. The Financial Times commented that the U.S.-UK trade agreement may not be good news for the world, and that Starmer's decision undermines multilateralism and brings risks to the UK. There was also criticism and skepticism from the American economic community. According to the UK's Sky News, Nobel Prize-winning economist Joseph Stiglitz stated in an interview that he "wouldn't see it as an achievement". Some research institutions believe that the Trump administration is now feeling pressure and is eager to roll back tariffs before they begin to seriously impact U.S. economic growth and inflation. Therefore, the agreement was reached because it touched a "soft spot" for Trump.
The international community is closely watching the implications of the U.S.-UK agreement for other countries, observing if the 10% rate can be a potential benchmark, and if the tariff adjustments in sectors like automobiles may serve as a model for future negotiations.
A senior researcher at ANBOUND believes that the U.S.-UK trade agreement does set a benchmark. The baseline tariff of 10% aligns with ANBOUND's earlier predictions and represents the lower limit of the U.S.'s tariff war strategy. For other product categories, the outcomes will depend on the tug-of-war and bargaining in each set of trade negotiations. Crucially, the U.S.'s demand for a 10% baseline tariff does have a certain rationale, in that it reflects changes in the post-World War II global landscape. The U.S. is opting out of the "zero-tariff inertia" and is establishing a more controllable, sovereignty-first tariff system. The 10% rate is seen as a politically sustainable, economically viable, and legally safer default level. Roughly speaking, it is expected that most countries' negotiation outcomes will settle around that 10% mark. This result gives Trump something to boast about, while remaining acceptable and reasonable for markets. Overall, despite the turbulent process, this represents a relatively rational and well-balanced outcome.
It is expected that even close allies like the UK will eventually reach a baseline tariff rate of around 10%. Especially for countries that have not taken retaliatory measures, this process may proceed more smoothly. Japanese Prime Minister Shigeru Ishiba recently emphasized on a television program that the U.S.-UK agreement is a model, but Japan has consistently called for the elimination of tariffs, and it "should aim for 0% tariffs". However, if U.S.-Japan negotiations ultimately reach a stalemate or take a dramatic turn, a 10% tariff might actually be the best option for Japan.
Against this backdrop, China occupies a particularly unique position. The U.S. and China have just held discussions in Switzerland, and they also talked about next steps, and things seem to be easing for now. However, a benchmark is still a benchmark: the repeatedly emphasized "10% baseline tariff" will continue to play a role in U.S.-China trade negotiations. The term "baseline tariff" is key here, but much like the "Nixon Shock", it's an important concept that can easily be forgotten over time.
It should be pointed out that, as has been repeatedly emphasized in the past, the trade war is not truly Trump's main focus. In the White House's published list of "priorities", there is relatively little mention of trade as a top issue. As the ANBOUND team previously noted, from an analytical standpoint, there is reason to believe that Trump's push for "reciprocal tariffs" is primarily a political maneuver, intended to satisfy his performative personality, essentially waiting for others to come to him for negotiations. At present, the best geopolitical response is actually to let Trump perform on his own while everyone else simply watches; it is best not to step onto the stage too easily.
Final analysis conclusion:
The trade agreement between the U.S. and the UK serves as a benchmark. It is estimated that most countries will end up with a negotiated outcome around the 10% mark. This kind of result allows Trump to boast on one hand, while on the other, it is acceptable to the market and reasonably justified. Overall, despite the turbulent process, this represents a relatively rational and satisfactory outcome.
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Zhijiang Zhao is a Research Fellow for Geopolitical Strategy programme at ANBOUND, an independent think tank.
