US President Donald Trump announced the first post-tariff agreement with the UK which eliminates tariffs on steel and aluminium, however, on the basis that trade complies with strict American security requirements.

The agreement aims to eliminate the USA's 25% tariffs on steel and aluminium imports, including those from the UK, which came into effect in March 2025. Under this new agreement, the USA will allow a limited volume of UK steel and aluminium, as well as certain derivative steel and aluminium products to enter the country at the lowest standard tariff rate of 3.3%, known as the most-favoured-nation (MFN).

The agreement also stated that the 25% tariffs on steel will be eliminated only if specific US conditions are fulfilled as per the ‘security of supply chains’ and the ‘nature of ownership of the relevant production facilities'. The specifics regarding whether the removal of tariffs will include steel derivative products or only steel that has been melted and poured in the UK, remain uncertain, therefore, Chinese ownership of facilities located in the UK may still be considered a strategic risk for the USA.

Although the agreement has been labelled a “historic deal”, the actual impact appears exaggerated as it does not address the structural issues impacting the UK’s steel and aluminium sectors. The UK’s steel production stood at ~4Mt in 2024, a 29% y-o-y decline after the closure of Tata Steel’s Port Talbot blast furnaces. Exports totalled 2.9Mt, of which, 180kt was exported to the USA. The UK steel industry currently faces high energy costs, rising imports, overcapacity in the global market, and trade uncertainties, while transitioning to low-carbon production. This is leading to plant closures, job losses, and government intervention in an attempt to protect domestic steelmaking. Even if the US-UK trade deal is confirmed, it will not spare the UK steel industry of an uncertain future.

Additionally, the importance of this agreement for the aluminium sector appears overstated, as the UK's primary production of aluminium relies solely on the output of ALVANCE British Aluminium, with minimal exports to the USA. In 2024, of the ~420kt of aluminium exported from the UK, only 7.5% was destined for the USA, despite it being UK’s second largest aluminium consumer. The primary aluminium industry in the USA has experienced a significant decline over the past few years, with three smelters closing since 2020. As a result, imports from the UK have a negligible impact on aluminium supply security in the USA, accounting for less than 1% in 2024.

The UK-USA deal has not escaped criticism, particularly from China, which has voiced strong concerns that the agreement may compel British companies to exclude Chinese products from its supply chains. It also argues that the deal is a violation of the principle that international agreements should not target third-party countries. This opposition underscores the complex geopolitical implications of the agreement, as well as the potential countermeasures that may arise in response to President Trump’s tariffs.