The much-touted trade “deal” with the United Kingdom announced on Thursday leaves much to be desired. Although Trump’s inner circle touts the deal as “a great trade agreement” and a “breakthrough,” most Americans will be left worse off than before “Liberation Day.” The deal primarily benefits a few groups, like steel and aluminum users, ranchers, and ethanol producers. But more broadly, Americans will be left paying higher taxes on British goods under Trump’s “reciprocal” 10 percent tariff. (RELATED: The ‘Most Bad’ Option: Trump’s Tariff Uncertainties)
In many cases, the 10 percent tariff is not actually reciprocal. Israel had very low tariff rates with the U.S. under a previous free trade agreement, which they dropped to 0 percent, and yet they still faced high “reciprocal” tariffs. In 2023, the U.K. had an average tariff rate on U.S. goods of less than 5 percent — and roughly comparable to the tariff rate the U.S. had on U.K. goods at the time. The 10 percent across-the-board tariff rate is simply a number President Trump made up and has labeled “reciprocal.” (RELATED: American Prosperity Depends on Free Trade)
Remember, tariffs are primarily a tax on the domestic market. Although they affect the country they are imposed on, many studies show that the tariff-imposing country bears the overwhelming majority of the costs of a tariff. This is why even unilateral reductions in trade barriers are economically beneficial for a country. (RELATED: Tariffs, a Solution in Search of a Problem)
President Trump’s strategy also opens the door for cronyism and corruption. If the U.K.–U.S. agreement serves as a blueprint for future deals, President Trump will maintain the 10 percent baseline and then, country by country, offer carve-outs in exchange for special-interest concessions. (RELATED: Presidents Are Not Economic Magicians)
But why should some companies and some industries get special treatment? That hardly seems fair for most Americans. The administration should push for greater access and lower tariffs from other countries than are currently in place in exchange for lower U.S. tariff rates on as many imports as possible.
Unfortunately, President Trump doesn’t see bilateral free trade as the goal.
He would rather have free trade for me but not for thee. He wants to keep U.S. tariff rates as high as possible while pressuring other countries to lower theirs. John Denton, the secretary general of the International Chamber of Commerce, said of the deal, “The reality is that U.S. tariffs on U.K. exports remain significantly higher than they were at the start of the year.” Kemi Badenoch, the Conservative leader, was more direct in her assessment of the deal, saying, “We cut our tariffs – America tripled theirs … we’ve just been shafted!”
While Badenoch rightly laments an increase in U.S. tariffs, her reasoning falls prey to the mercantilist fallacy that tariffs are good for the country imposing them. The tariffs that the U.K. charges the U.S. have come, which will benefit both countries. Average tariff rates can be hard to calculate, but some sources say this framework will reduce the overall U.K. tariff rate on U.S. goods from 5.1 percent to 1.8 percent.
So, yes, this agreement will create greater and better access for American ethanol, beef, and other agricultural products. But these benefits for exporters are overshadowed by greater U.S. trade barriers with one of our oldest allies and one of the world’s largest economies. Higher U.S. tariffs on the U.K. are bad for people in the U.K. and in the U.S.
Matt Blunt, president of the American Automotive Policy Council, highlights unintentional harms from tariff deals. He noted that “Under this deal, it will now be cheaper to import a UK vehicle with very little U.S. content than a USMCA compliant vehicle from Mexico or Canada that is half American parts. This hurts American automakers, suppliers, and auto workers.” Indeed, the automotive sector is already reeling from the effects of the tariffs, with several automotive plants across the U.S. announcing layoffs and shutdowns.
Although Trump claims that our trade policy has been too open, allowing the U.S. to be taken advantage of, that’s simply not the case. Two indices measuring trade freedom place the U.S. in the middle of the pack. The Fraser Institute ranks the U.S. 43rd, and the Heritage Foundation ranks it 69th. The U.S. can hardly be called a bastion of free trade with those rankings.
The most important downside to President Trump’s strategy of liberation is that the overall U.S. tariff rate on other countries will be significantly higher than before April 2, 2025. This means less trade, higher costs, and higher prices for ordinary Americans on tens of thousands of products. The higher tariff rate will mean more tax revenue, but far less than the Trump administration suggests.
One can be forgiven for wondering: what have we really gained here? Unfortunately, the answer seems to be, “not much.”
READ MORE from Paul Mueller and David Hebert:
Tariff Delay Opportunities and Risks
The ‘Most Bad’ Option: Trump’s Tariff Uncertainties
Presidents Are Not Economic Magicians
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