President Trump Announces Preliminary Trade Agreements With U.K., China For Tariff Reductions

Highlights

• The Trump Administration recently reached two preliminary agreements on tariff reductions with the United Kingdom and China. Though neither agreement outlines final terms, both set forth commitments for continued negotiations and include interim tariff reductions pending the conclusion of comprehensive deal negotiations.
• The U.S.-U.K. trade agreement includes the removal of the U.K.'s 20 percent retaliatory tariff on U.S. beef starting May 8, 2025, new tariff-free quotas for U.S. beef and 1.4 billion liters of U.S. ethanol, a U.S. commitment to allow 100,000 U.K. automobiles to enter at a reduced 10 percent tariff and the start of negotiations on quotas for U.K. steel and aluminum, as well as continued talks on rules of origin, pharmaceuticals, digital trade, financial services and agricultural market access.
• The U.S.-China trade agreement, announced on May 12 and effective May 14, 2025, reduces bilateral tariffs by 115 percent and sets a 30 percent baseline tariff on China-origin goods for 90 days – comprising a 20 percent fentanyl-related tariff and 10 percent reciprocal tariff – while maintaining all other tariffs under Sections 301 and 232 of the Trade Act of 1974. The U.S. also agreed to lower the de minimis threshold on low-value imports from 120 percent to 54 percent. U.S. exports to China will be subject to a 10 percent tariff. This bilateral tariff reduction is for 90 days while negotiations on a permanent agreement continue.

The Trump Administration recently reached two preliminary agreements on tariff reductions with the United Kingdom and China. Though neither agreement outlines final terms, both set forth commitments for continued negotiations and include interim tariff reductions pending the conclusion of comprehensive deal negotiations. Details are continuing to emerge on both agreements as talks continue toward a final deal.

While the administration negotiates bilaterally with trading partners to reduce the tariff and nontariff barriers to U.S. exports, the legal authority used by the president to unilaterally implement the reciprocal tariffs, the International Economic Powers Act (IEEPA), is being challenged in the U.S. Court of International Trade (CIT). The future of the global tariffs may depend on the outcome of the court's decision. While congressional Republicans and the administration continue to support the president's implementation of the tariffs, Democratic lawmakers are leveraging congressional policymaking and the CIT to challenge the tariffs' legal basis and implementation, arguing that tariffs are increasing costs on U.S. consumers.

The U.K.

Though the U.S.-China deal amounts to a pause in the tariffs that essentially halted trade, the deal with the U.K. is more detailed, granular and includes commitments of substantive action from both countries. Beginning May 8, 2025, the U.K. will remove its 20 percent retaliatory tariff on beef imports and set a quota of tariff-free U.S. beef imports. Additionally, the U.K. will offer a preferential duty-free quota of 1.4 billion liters of U.S. ethanol.

The 10 percent reciprocal tariff on U.K. goods will remain, which is consistent with President Donald Trump's statements that a 10 percent tariff will remain a "universal baseline" for imports from all nations. Though the 25 percent Trade Act of 1974 Section 232 tariff on automobiles and steel and aluminum products will also remain, the U.S. commits to create a quota of 100,000 U.K. automobile imports to enter the U.S. at a 10 percent tariff rate (instead of 25 percent), establish an "accompanying arrangement" for automobile parts and begin the process of creating a quota of U.K.-origin steel and aluminum exempted from the Section 232 tariff.

The agreement also includes commitments for continued negotiations on key topics, including rules of origin requirements, the Section 232 investigation on pharmaceuticals, digital services and trade provisions, financial services and agricultural market access. One issue that was not resolved in the agreement is the future of the U.K. digital service tax, a 2 percent tax on large multinational digital service companies that has been criticized by the Trump Administration as discriminatory against American firms such as Amazon, Facebook, Meta and Google. It is reported that the administration pressed the U.K. government to remove the tax or at least reduce or restructure it, but no agreement was reached. It is likely that the U.K. digital service tax will be subject to continued negotiations or an alternate agreement entirely.

China

On May 12, 2025, the U.S. and China released a joint statement, and The White House published an executive order (EO) announcing an agreement to significantly reduce tariffs between the two countries. Effective May 14, 2025, China and the U.S. reduced their tariffs by 115 percent. Beginning on May 14, China-origin goods are subject to a 30 percent baseline tariff, comprising a 20 percent tariff related to alleged fentanyl trafficking and a 10 percent reciprocal tariff (previously set at 125 percent). The 10 percent reciprocal tariff rate will rise to 34 percent if an agreement is not reached by Aug. 14, 2025, making the total baseline tariff 54 percent. In addition, the agreement provided that the U.S. would lower the de minimis rate on low-value imports from 120 percent to 54 percent, or $100 per postal item.

Though not specified in the EO, the language of the agreement suggests that the exclusions on the reciprocal tariffs (i.e., semiconductor devices, critical minerals, and Section 232 tariff-impacted steel and aluminum products and derivatives, as well as automobiles and auto parts) will remain. As an example, a steel or aluminum article originating from China would be subject to a total 45 percent tariff (20 percent fentanyl tariff and 25 percent Section 232 tariff), but it would remain excluded from the 10 percent reciprocal tariff. Goods from China will still be subject to all other tariffs, including those under Section 301 of the Trade Act of 1974.

U.S. goods being sent to China will be subject to a total 10 percent tariff for 90 days beginning on May 14, 2025, with the potential increase to 34 percent if an agreement is not reached by Aug. 14, 2025.

The joint statement also indicates that China and the U.S. will establish a mechanism to continue discussions about economic and trade relations after they have taken the steps described above.

The Chinese negotiating team will be led by State Council Vice Premier He Lifeng, and the U.S. negotiating team will be jointly led by U.S. Department of the Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer. Meetings venues will alternate between the two countries or be held in a mutually agreed third country.

It remains unclear whether ongoing U.S.-China negotiations will address the 20 percent tariff imposed by President Trump in response to China's alleged role in the fentanyl crisis. On April 12, 2025, President Trump described a "breakthrough," stating that China had agreed to curb exports of precursor chemicals used by cartels in Mexico to produce fentanyl. However, this assertion was promptly rejected by the Chinese Foreign Ministry. Spokesperson Lin Jian reiterated that "fentanyl is the U.S.'s problem, not China's" and criticized the U.S. for imposing tariffs under what China views as a mischaracterization of the issue "despite the goodwill China has shown, the U.S. wrongly slapped tariffs on Chinese imports by citing the issue of fentanyl."

Updated Tariff Table

In previous alerts, the Holland & Knight Tariff Taskforce has provided a high-level summary of the status of tariffs for China, Canada and Mexico. The updated table below reflects the U.S.-China negotiation reducing the reciprocal tariff rate and reduced China retaliatory tariff.

On Aug. 12, 2025, the Chinese retaliatory tariffs are set to rise to 34 percent, and the U.S. reciprocal tariffs are set to rise to 34 percent (totaling 54 percent).

*These apply only to goods that do not qualify for duty-free treatment under the United States-Mexico-Canada Agreement (USMCA). If these apply, then the Section 232 tariffs do not apply.

**The Section 232 tariffs do not overlap. The scope of Section 232 tariffs for steel and aluminum derivatives overlaps (e.g., 9403.20.00, HTSUS). For derivatives, only the aluminum/steel content is dutiable.

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