President Donald Trump, on Thursday, proudly announced a newly forged trade pact with the United Kingdom, identifying the agreement as a significant and “maxed out deal.” This deal, according to the President, is poised to serve as a benchmark for future trade negotiations between the United States and other countries. Despite the President’s enthusiastic endorsement, some experts have expressed reservations, suggesting that the terms of the U.K. deal might signal a trend toward sustained high tariff rates.
The newly established trade agreement with the U.K. does introduce several concessions; however, it notably maintains a 10% tariff on British imports. This rate was set during President Trump’s “Liberation Day” announcement on April 2, which was significant as it established a baseline tariff rate applicable to imports from other nations. Karoline Leavitt, a White House spokeswoman, underlined on Friday that the President’s commitment to this 10% baseline tariff is steadfast, applicable not only to the U.K. but across all his trade negotiations.
While a 10% tariff rate marks a reduction from some of the higher tariffs imposed last month by Mr. Trump—peaking at a staggering 145% on imports from China and 11% from the Democratic Republic of Congo—it remains significantly above the global average tariff rate of 3% before the onset of Trump’s second term in office. This data comes from the Centre for Economic Policy Research, a respected, nonpartisan think tank.
This strategic reduction to a 10% tariff could potentially alleviate some financial strain on U.S. businesses and consumers, who have been grappling with increased prices due to higher costs of imports. Nevertheless, such a rate continues to pose substantial challenges for importers who bear the cost of these duties, frequently transferring these expenses onto American consumers. According to Gregory Daco, the chief economist at EY, the effective average tariff rate is expected to linger in the double digits. “What that means for businesses is that they’re simply going to be paying more for the same goods that they have been importing, and they’re going to be raising prices onto customers who have much less ability to withstand ongoing price increases,” Daco explained in a statement to CBS MoneyWatch.
The potential economic implications of enduring high tariffs are significant, given that consumer spending constitutes approximately 70% of U.S. economic activity. Increased financial pressure on consumers could lead to reduced spending, thereby adversely affecting income growth and potentially stifling job creation among businesses hit hard by tariffs.
Scott Lincicome, Vice President of Economics at the Cato Institute, described the deal with Britain as “a modest improvement over what we had yesterday, but — with most U.S. tariffs still in place and very limited new U.K. liberalization — remains worse than the pre-Trump status quo.” This sentiment reflects widespread concern among economists about the potential for recession triggered by an ongoing trade war, fears that were initially sparked by the stock market and U.S. Treasury price responses to Trump’s April 2 tariff announcement.
Despite the market’s initial decline, stocks recovered modestly following the announcement of the U.K. trade deal, bolstered by growing optimism on Wall Street that the Trump administration might secure additional trade agreements soon. However, public opinion appears mixed regarding these trade policies; a recent CBS News poll indicated that 53% of Americans feel the national economy is deteriorating, and only 41% support the administration’s tariff strategies.
Underlying these negotiations is the pervasive uncertainty about the future scale and duration of tariff impositions, complicating the ability of businesses reliant on international trade to plan effectively concerning spending, hiring, and managing their supply chains. Han-koo Yeo, a senior fellow at the Peterson Institute for International Economics, highlighted that “even if this tariff is lower, this fundamental anxiety related to uncertainty and unpredictability remains,” posing significant hurdles for full economic recovery by consumers, investors, and businesses.
Observations from Mark Luschini, the chief investment strategist at Janney Capital Management, point to potential benefits as trade discussions progress. “Now, at least the wheels are in motion relative to discussions with a variety of countries, with the deal between the United States and the U.K. as perhaps indicative of the fact that there could be tariff and trade-related de-escalation — even without a fully drawn-out trade agreement,” Luschini noted.
With ongoing trade talks focusing on major global players, including an upcoming key meeting this weekend in Switzerland between U.S. officials and Chinese negotiators, there remains a cautious optimism towards achieving a meaningful reduction in tariff barriers. However, Commerce Secretary Howard Lutnick emphasized that the President prioritizes comprehensive agreements—”He wants to do the kind of deal we did today, where we said, ‘Look, this is just a win for America,’ and we figured out how to make it a win for them.”
Despite potential reductions, the prevailing high tariff environment nurtured by ongoing negotiations highlights significant persisting challenges. As Luschini remarked, “Even if we were to see a continuation of the universal 10% tariff applied and some rollback of
