Published by Global Banking & Finance Review®
Posted on May 8, 2025
4 min readLast updated: January 23, 2026
Add as preferred source on GoogleBritain strikes a quick trade deal with the US, reducing tariffs on cars and steel, while maintaining food standards.
By Alistair Smout and Andrea Shalal
LONDON/WASHINGTON (Reuters) -Britain spent months buttering up Donald Trump, keeping calm in the face of the U.S. president's tariff-led assault on global trade, before deciding late on Wednesday to drop its demands for a comprehensive deal and take a quick but limited win instead.
Britain had been in talks with Trump's administration for months in a bid to avoid, and then to lower, the 10% U.S. baseline tariffs it faced on all goods, and the 25% levies that were imposed on cars and steel.
Late on Wednesday, as business minister Jonathan Reynolds dined with London's business and finance leaders and Prime Minister Keir Starmer was watching his beloved soccer team, they agreed to strike a deal that would improve access for the worst-hit sectors, rather than do a more comprehensive deal.
"Because we haven't got that full agreement in place, being able to have this announcement on the sectoral side is obviously of crucial importance," Reynolds told reporters on Thursday, citing the significant impact of the tariffs on carmakers in particular.
Officials on both sides said Britain had been able to strike the first deal with Trump to lower tariffs because the two countries had relatively balanced trade and because Britain had not retaliated like others with its own tariffs.
Trump's deep affinity for Britain - his mother's birthplace - was also a factor, as was the British government willingness to flatter Trump at all times, for instance with a royal invitation to honor Trump with a second state visit during Starmer's trip to Washington in February.
Starmer dialled into the Oval Office announcement to thank Trump, saying it was appropriate the deal was clinched on the 80th anniversary of the end of the Second World War in Europe.
"We've been absolutely the closest of allies for so many years, keeping the peace through that close alliance, that friendship, and now we add to that this deal on trade and the economy," Starmer told Trump.
"I want to thank you for your leadership on that, Donald."
A second British official said Starmer and Trump held a "warm" conversation on Wednesday evening to seal the deal.
MOUNTING PRESSURE
The United States has been under pressure from investors to strike deals to de-escalate its tariff war after Trump's often chaotic policymaking upended global trade with friends and foe alike, threatening to stoke inflation and start a recession.
The tariffs had also put pressure on Starmer, with Jaguar Land Rover initially pausing exports to the U.S., and his government forced to seize control of British Steel to keep it operating.
Under the terms of the new deal, tariffs on 100,000 British-made cars a year will go to 10% from 27.5%, while tariffs on steel will go to zero from 25%.
In return, Britain agreed new reciprocal market access for beef although it will maintain stringent food standards that had been a red line in talks, and removed the tariff on ethanol.
A key figure in talks was Peter Mandelson, a veteran from Tony Blair's Labour government and former European trade commissioner, who Starmer appointed as an ambassador to Washington.
Known as a smooth talker and seen as an unusually political appointment to the role, Mandelson was tasked with handling a "new chapter" in bilateral relations, and he stood behind Trump's left shoulder as he announced the deal.
"You took it to another level," Mandelson told Trump in the Oval Office, praising the president's personal role in talks with an "11th hour" call to get more out of talks.
Starmer admitted that the final conclusion of talks caught him off guard.
"I didn't know the exact day - I wouldn't have been having my phone call with President Trump halfway through the second half of the Arsenal-PSG game had I planned it better, but that's the way it turned out," Starmer told reporters, referring to the north London side who were knocked out of the Champions League on Wednesday night.
The two sides have now said they will continue to discuss ways to lower the reciprocal tariffs. Britain will be considered for preferential treatment under any further tariffs, and it is looking to deepen digital ties.
Economists, affected sectors including farmers, and trade experts welcomed the deal, but urged the government to go further.
Mandelson took that on board.
"For us, it's not the end," he said. "It's the end just of the beginning... There is yet more we can do."
(Additional reporting by Elizabeth Piper, Editing by Kate Holton and Nick Zieminski)
The trade deal resulted in a reduction of tariffs on 100,000 British-made cars from 27.5% to 10%, and tariffs on steel were eliminated.
Peter Mandelson, a former European trade commissioner, was a key figure in the talks, appointed as an ambassador to Washington to facilitate the negotiations.
Starmer expressed gratitude to Trump for the leadership shown in clinching the deal, highlighting the long-standing alliance between the two countries.
The US faced investor pressure to de-escalate its tariff war, while Starmer's government dealt with the impact of tariffs on British companies like Jaguar Land Rover.
Both sides have agreed to continue discussions on lowering reciprocal tariffs, with Britain seeking preferential treatment under any future tariffs.
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