LONDON — Keir Starmer once believed he had secured a solid trade agreement with the United States aimed at reducing tariffs. However, Donald Trump’s recent actions suggest he has other plans, leading British officials to scramble amidst newfound tariff announcements that may undermine the deal struck earlier this year.
During Trump’s second State Visit to the UK, which featured a grand carriage procession with King Charles III and a military display, he remarked, “I think it was a better deal for you than us, but these are minor details” while addressing Starmer at a press briefing. This comment reflects the growing tension surrounding the trade pact, particularly as new tariffs on pharmaceuticals, trucks, and movies emerge.
Tariff threats in the pharmaceutical sector
One of the most alarming threats is Trump’s intention to impose a staggering 100 percent tariff on pharmaceutical imports unless relevant companies initiate construction on U.S. facilities. While the European Union has capped its pharmaceutical tariff exposure at 15 percent, the UK’s position remains ambiguous. The May trade agreement, heavily promoted by ministers during the recent Labour Party conference, holds the possibility of “preferential treatment” concerning tariffs, contingent on the UK enhancing conditions for American pharmaceutical companies operating within its borders.
“This needs to be seen in the much wider picture of U.S. demands given conditionality on agreeing tariffs and exemption for firms building U.S. sites,” said Mark Dayan, Brexit program lead at the Nuffield Trust.
Trump has criticized the UK’s National Institute for Health and Care Excellence (NICE), arguing that its cost-effectiveness assessments unfairly burden U.S. firms, compelling them to reduce prices before new drugs can be made available to patients. His stance is rooted in a belief that American patients should not have to bear higher prices than those in other countries. In line with this, he has recently reached out to major pharmaceutical companies, urging them to align their pricing with “most favored nation” standards.
In response to Trump’s reshoring requests, leading UK pharmaceutical companies such as GSK and AstraZeneca have made substantial investments in the U.S. GSK is constructing an $800 million facility in Pennsylvania, while AstraZeneca has unveiled a $50 billion investment plan set to extend to 2030. Since these companies are either breaking ground or have existing manufacturing facilities, they may qualify for exemptions from the threatened tariffs, according to industry experts.
Concerns over broader trade implications
Despite these actions, uncertainty looms over the British pharmaceutical industry, particularly regarding rules of origin and the implications of Trump’s evolving tariff policies. The UK government is currently engaged in discussions with the U.S. over NHS drug pricing, with Science Minister Patrick Vallance indicating that the health service may need to increase its spending to remain attractive for investment.
Starmer’s chief business adviser Varun Chandra has traveled to Washington this week, aiming to address the looming tariff threats—possibly in exchange for increased NHS expenditures on medications before a critical deadline. However, the political ramifications of such negotiations are complex, with some experts warning that the government must tread carefully to avoid perceptions of direct connections between U.S. pressures and NHS financing.
In addition to pharmaceutical uncertainties, Trump has also threatened to impose a 25 percent tariff on U.S. imports of heavy trucks. An industry representative noted that while there is still considerable ambiguity surrounding this new tariff policy, it underscores the need for clarity, as 60 percent of UK goods exporters are concerned about potential price hikes for their customers.
Moreover, the U.S. is poised to introduce tariffs on imported kitchen cabinets, furniture, and softwood lumber, although the May trade agreement offers some protection for the UK furniture sector, maintaining tariffs at 10 percent.
Finally, Trump has reiterated his earlier stance on film tariffs by announcing a potential 100 percent flat tariff on “any and all movies that are made outside of the United States.” This decision has already complicated conversations with U.S. studios, raising concerns about investment delays in the UK film industry.
As the situation unfolds, the ramifications of Trump’s tariff threats on the UK’s trade landscape remain uncertain, with both sides engaged in high-stakes negotiations that could shape the future of bilateral trade relations.