UK Steel Exporters Gain Temporary Reprieve from Soaring US Tariffs, But Uncertainty Looms
British steel and aluminium exporters have received a crucial, albeit temporary, reprieve from a significant tariff increase imposed by US President Donald Trump. A new executive order doubled import tariffs on these metals from 25% to a steep 50% for most countries, effective from Wednesday, June 4, 2025. However, the United Kingdom has been specifically exempted from this hike, with its exports to the US remaining subject to the previous 25% rate.
This conditional exemption is directly linked to the US-UK Economic Prosperity Deal (EPD) signed on May 8, 2025. President Trump cited this pending agreement as the reason for granting the UK “different treatment.” The EPD, which is yet to be fully implemented in UK law, aims for a more favourable trade relationship, including provisions to cut tariffs on UK steel and aluminium exports to zero and reduce import taxes on cars to 10%.
A Critical Deadline and Conditional Future
While the temporary carve-out offers immediate relief, the situation remains precarious. The executive order explicitly states that the US could still increase the tariff on the UK to the full 50% “on or after July 9, 2025.” This hinges on whether the US determines that the UK has “not complied with relevant aspects of the EPD.” This creates a critical deadline for the UK government to finalise the necessary legislative steps to bring the deal into force and satisfy the US conditions. The UK’s temporary exemption followed recent discussions between UK Business Secretary Jonathan Reynolds and US Trade Representative Jamieson Greer in Paris. The UK government has reiterated its commitment to implementing the agreement “as soon as possible” to safeguard British jobs and businesses.
Significant Stakes for UK Industry
The US market is a vital destination for the UK’s metal sector. It’s the destination for approximately 7% of the UK’s direct steel exports, valued at over £400 million annually. However, the impact extends far beyond raw materials. Tariffs also significantly affect derivative products – items made with steel and aluminium, such as machinery, gym equipment, and furniture. These exports to the US are valued at a much larger £2.2 billion per year, representing about 5% of total UK goods exports to America.
The uncertainty surrounding tariffs is already having a “corrosive effect” on businesses. Gareth Stace, chief executive of UK Steel, described the period as a “rollercoaster ride,” stating that while avoiding the 50% rate allows a “temporary sigh of relief,” the fundamental uncertainty is damaging. Customers in the US are reportedly cancelling or pausing orders due to the unpredictable future tariff rates. Rowan Crozier, CEO of Brandauer, a metal-stamping firm, echoed this, noting that while the 25% rate is better than 50%, the “far reaching” uncertainty makes customers less confident in forward planning.
Another major concern is the potential for diverted imports. Steel from other countries initially intended for the US market, now facing the 50% tariff, could be redirected to the UK, potentially undercutting domestic producers. UK Steel is urging the government to strengthen domestic safeguard measures to prevent this.
The EPD: Quotas and Concessions
Even if the EPD is fully implemented and the 25% tariff is removed, the deal itself introduces new complexities. It reportedly includes a quota system for UK steel and aluminium exports at “most favoured nation rates.” The specifics of this quota – including the allowed volume and whether it applies to derivative products or only steel melted and poured in the UK – remain unclear, adding another layer of uncertainty for exporters.
Furthermore, the deal wasn’t a “free lunch” for the UK. As part of the agreement, the UK made concessions, including cutting tariffs on some US beef products and ethanol. These concessions have created challenges for the UK’s own ethanol market and the wheat farmers who supply it. There are concerns that any UK government actions to protect these affected domestic industries could be viewed by the US as “backsliding” on the agreement, potentially jeopardizing the entire deal and the temporary tariff exemption.
Broader Economic and Political Landscape
President Trump’s tariff strategy aims to boost US manufacturing and jobs by making imported goods more expensive, compelling US businesses and consumers to buy domestically. However, economists widely warn that this often leads to higher prices for US buyers and can result in job losses in sectors reliant on imported materials. Alan Auerbach, director of tax policy and public finance at the University of California, noted that increased US steel production won’t happen quickly, and in the short term, US businesses will simply pay more for imported steel. He added that the ongoing uncertainty itself undermines the goal of boosting US production because businesses need certainty for long-term investment decisions. US businesses like Independent Can Co. and Drill Rod & Tool Steels have already reported putting investments on hold, raising prices, cutting hours, and facing cancelled orders due to existing tariffs, fearing further damage from the 50% rate. A 2020 analysis estimated that initial steel tariffs led to a net loss of jobs across other US sectors, a trend economists fear will worsen with the higher rate.
In the UK political sphere, the opposition has criticised the government’s handling of the negotiations, with the Conservatives calling the order a “fresh tariff blow” and accusing Labour of leaving businesses “in limbo” due to “botched negotiations.” Internationally, the European Union is reportedly preparing potential retaliation and is engaged in “intense talks” with the US to seek a rollback of the higher tariff threat.
For UK steel and aluminium businesses, the path ahead is fraught with uncertainty. While the immediate threat of a 50% tariff has been delayed, the clock is ticking towards the July 9th deadline, and the successful implementation of the US-UK trade deal remains paramount to securing a more stable future for exports to their largest single trading partner.
References
- https://www.bbc.com/news/articles/cg713y73plro
- https://www.bbc.co.uk/news/articles/cg713y73plro
- https://www.bbc.com/news/live/c308v53v4e6t
- https://www.bbc.co.uk/news/live/c308v53v4e6t
- https://www.bbc.com/news/articles/cj3j7z73yv2o
