Sir Keir Starmer has put on hold hopes of a zero per cent US tariff for a quota of British steel exports in favour of negotiating with Donald Trump a “permanent” 25 per cent tariff for all steel exports.
The prime minister’s allies told the Financial Times that a guaranteed 25 per cent tariff for UK steel exports would provide “certainty” to the industry and a competitive advantage as it is half the 50 per cent rate paid by other countries.
Although Starmer’s team still hopes to move towards a zero per cent tariff over time, the outline deal struck in the past 24 hours between London and Washington will be seen by some as a capitulation by the prime minister.
When Starmer and Trump struck an outline tariff deal in May, Downing Street boasted that the prime minister had “negotiated the 25 per cent tariff down to zero”.
Andrew Griffith, Conservative shadow trade secretary, said: “Now it turns out that was untrue and it’s actually 25 per cent. Either his maths or his relationship with the truth clearly needs some work.”
The British Chambers of Commerce said the news would be “greeted with dismay” by UK industry and urged Starmer to keep talking to the US to improve the deal.
“While a 25 per cent tariff is half of that faced by the rest of the world, it will still negatively impact jobs and livelihoods across the country,” said the BCC’s head of trade policy William Bain.
Gareth Stace, director-general of the trade body UK Steel, said: “It will be disappointing if we do not have the tariff-free quota level, but if the US was never offering that deal, then the final decision on 25 per cent offers a degree of certainty and potentially a competitive advantage so long as other countries remain at 50 per cent.”
UK government officials said locking in the current preferential 25 per cent tariff deal for British steel was not yet a “formal agreement” but that it might be announced during Trump’s three-day state visit to Britain, which starts on Tuesday.
They say Britain could have pushed for a small zero per cent quota for British steel exports, but that would have left the remainder exposed to the US 50 per cent global tariff.
“It also would have given no incentive to grow exports,” one official told the FT, adding that a permanent 25 per cent rate would be a “hard won concession” from the Trump administration.
They added: “This proposal to make the 25 per cent tariff permanent gives us an advantage over global competitors, it gives certainty to the industry and there are incentives to expand exports.”
British officials said there would still be “a path” towards a zero per cent tariff if the UK, potentially in concert with Europe, could more closely align with US attempts to address Chinese steel-dumping.
Under the terms of the UK-US “economic prosperity deal” hastily agreed in May, Trump offered Starmer a potential tariff-free steel and aluminium quota if the UK met “US requirements” on supply chains.
Negotiations since have been bogged down by US requirements that steel should be “melted and poured” in the UK to qualify, and US concerns over excess Chinese steel finding its way into European supply chains.
British negotiators did, however, manage to win an exemption in June from Trump’s decision to double US steel tariffs to 50 per cent. This arrangement kept the UK at 25 per cent, a significant discount against global competitors including the EU.
The UK currently has safeguard measures against Chinese steel, allowing a set amount of products to be imported tariff-free, and then imposing a 25 per cent tariff on all imports once the quota has been exceeded.
Sam Lowe, trade lead at consultancy Flint Global, said the prospect of a permanent 25 per cent tariff on steel was likely to disappoint UK industry, which had expected a zero per cent rate.
“Depending on the quota size that was on offer, the government will be able to argue that an average tariff rate applied to UK exports of 25 per cent will end up being lower than a zero per cent tariff applied to a small volume of exports and then 50 per cent to everything else,” Lowe said.
“However, I think this will come as a surprise to industry, in particular those which are suffering as a result of the US tariff on steel derivative products,” he added.
The 25 per cent tariff hits not just UK steel manufacturers but also other companies that use steel in products that they export to the US — such as the Staffordshire-based digger manufacturer JCB.
The UK government said: “Thanks to the strength of the UK-US partnership, we are still the only country to benefit from a 25 per cent tariff on steel exports to the US, reinforcing our position as a trusted source of high-quality steel.”