UK-US trade deal – what does it mean for small businesses?

The UK and US governments have announced a deal to reduce trade tariffs.

The ‘full and comprehensive’ trade deal will see more favourable tariffs on UK cars exported to the US, plus a range of US exports to the UK.

However, it could also signal the end of the two per cent digital sales tax, which was designed to protect small high street and retail businesses.

US-UK trade deal – trade tariffs on cars reduced

President Donald Trump has announced that the trade tariff on 100,000 cars a year will be reduced from 27.5 per cent to 10 per cent.

Rolls Royce engines and aeroplane parts can be exported with no tariff required.

This is considered to be a boost for the UK economy, with £9 billion worth of cars exported to the US each year.

Trade deal includes US exports

As well as UK exports to the US, the new deal includes a range of US exports to the UK, including:

American beef
ethanol
agricultural products

Ahead of announcing the trade deal, President Donald Trump said: “Because of our long time history and allegiance together, it is a great honour to have the United Kingdom as our first announcement.

“Many other deals, which are in serious stages of negotiation, to follow.”

Could other tariffs be reduced?

At the moment, most goods imported to the US from the UK are subject to 10 per cent tariffs, while steel and aluminium have a 27.5 per cent tariff.

UK Prime Minister Kier Starmer has said that UK steel will be part of the deal.

However, the final details of the deal will be published in the coming weeks, with President Trump saying that it’s ‘conclusive’.

Could the end of the digital sales tax be bad news for small businesses?

It’s been rumoured that the UK government could abolish or reduce the two per cent digital sales tax as part of the trade deal. However, no details of this have been shared yet.

This tax has been in place since 2020 on large US ecommerce businesses such as Amazon. It was estimated to raise £800 million a year and was intended to support UK public services.

It was also positioned as a way of levelling the playing field for small high street and retail businesses by increasing the tax burden for larger businesses.

If this tax is removed or reduced, it could exacerbate difficult trading conditions for small businesses.

What is the UK’s trade deal with India?

Earlier this month, the UK announced a trade deal with India. The deal will make it easier for businesses in the UK to export the following products to India:

cosmetics
high value cars
lamb and salmon
chocolate and biscuits
gin and whisky
aerospace, electrical, and medical devices

There will also be lower tariffs on Indian products imported to the UK, such as:

jewellery and gems
clothing and footwear
food including frozen prawns
cars

Trade between India and the UK totalled almost £50 billion in 2024. The new deal is estimated to increase trade by an extra £25.5 billion a year by 2040.

Politicians criticise National Insurance exemption

The new trade deal extends an exemption on National Insurance payments for people from India on short-term visas.

The policy has been criticised by political parties, with suggestions that it’ll mean employers favour Indian workers over UK employees.

Conservative leader Kemi Badenoch says she turned down a similar deal when she was Business Secretary because it represents a ‘two-tier tax’ that could cost the economy millions of pounds.

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