Why it Matters

The Trump administration is facing a narrowing window to stabilize its trade relationship with the United Kingdom as a new government takes office in London, according to a Congressional Research Service report released July 17. The report outlines a complex dynamic in which the United States and the United Kingdom have implemented parts of a bilateral Economic Prosperity Deal while unresolved trade disputes and political changes continue to create uncertainty.

The United States and the United Kingdom are the world's first- and fifth-largest economies, respectively, with deeply integrated trade and investment ties. In 2025, total U.S. goods trade with the United Kingdom reached $162.2 billion. Beyond goods, the United Kingdom was the United States' largest services trading partner, with $208.4 billion in total services trade, while U.S. investment in the United Kingdom totaled $1.1 trillion.

The Trump administration's tariff actions prompted negotiations that culminated in the Economic Prosperity Deal announced in May 2025. Under the agreement, the United States capped most additional tariffs on U.K. goods at 10% and eliminated tariffs on certain aerospace products. The United Kingdom agreed to reduce tariffs on U.S. beef and ethanol.

Key provisions remain unresolved. A proposed alternative arrangement for Section 232 steel and aluminum tariffs has not been implemented, leaving the 25% tariff in place for U.K. steel and aluminum products. The report added that the Economic Prosperity Deal is not legally binding and that Congress had no formal consultative or approval role in negotiating or approving its terms.

The Big Picture

The U.S.-U.K. trade relationship reflects broader changes in trade policy under the Trump administration. President Donald Trump has prioritized tariffs as a central trade policy tool during his second term, imposing both across-the-board and sector-specific tariffs on imports, including those from the United Kingdom.

Following the United Kingdom's withdrawal from the European Union in January 2021, the country gained authority to negotiate its own trade agreements. The United States and the United Kingdom subsequently pursued closer bilateral economic ties, leading to the announcement of the Economic Prosperity Deal in May 2025. The United Kingdom was the United States' fourth-largest goods export market in 2025, receiving $97.4 billion in exports. U.S. imports from the United Kingdom totaled $64.8 billion.

The relationship nevertheless has faced repeated strains. In April, Trump said the United States would likely impose additional tariffs if the United Kingdom retained its Digital Services Tax. On June 26, he threatened 100% tariffs on European countries that implement digital services taxes.

The administration also raised new trade concerns. On June 2, the Office of the U.S. Trade Representative found the United Kingdom maintained only a patchwork approach to preventing imports made with forced labor and proposed an additional 10% tariff tied to those findings. The CRS report also notes that the United States suspended the Technology Prosperity Deal in December 2025, while nuclear technology cooperation resumed in February.

Political Stakes

The administration also faces legal constraints. In February, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act does not authorize the president to impose tariffs. The administration subsequently shifted to Section 122 of the Trade Act of 1974, authority that expires July 24 absent further action.

Political developments in the United Kingdom add another layer of uncertainty. Prime Minister Keir Starmer announced his resignation on June 22. On July 17, Labour confirmed Andy Burnham as its new leader, and he assumed office as prime minister on July 20. The CRS report notes it remains unclear how Burnham's government will approach trade relations with the United States.

The Bottom Line

The CRS report underscores a central tension in U.S.-U.K. trade policy: the Trump administration has relied heavily on tariffs as a negotiating tool even as the legal basis for some of those tariffs has been narrowed and the United Kingdom undergoes a change in political leadership.

The Economic Prosperity Deal helped avert a broader trade conflict and advanced provisions such as the automotive tariff quota, aerospace tariff relief and a 10% tariff cap on most U.K. products. However, key issues remain unresolved, including steel and aluminum tariffs, forced-labor concerns and disputes over the United Kingdom's Digital Services Tax.

Congress also retains significant influence over future U.S.-U.K. trade policy. Lawmakers could modify presidential tariff authorities or pursue legislation authorizing negotiations on a comprehensive bilateral free trade agreement with congressional involvement. The new British government under Andy Burnham must now decide whether to continue implementing the Economic Prosperity Deal, seek changes to its terms or pursue a broader free trade agreement.

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