UK
Ireland
The resolution of the Greenland crisis puts the US trade deals with the UK and EU back on track – but for how long?
In summary
- Trump’s agreement to talks over Greenland gives UK businesses a reprieve from new tariffs
- Both countries can now work on the details of the UK-US Economic Prosperity Deal
- Progress on pharmaceuticals in December gives some encouragement that businesses can benefit
- But both the limits of the deal’s ambitions and continuing uncertainty mean there’s little cause for celebration
So, the UK and US trade deal is back on, along with the EU’s deal, too. And new tariffs are, for now at least, off the menu.
President Trump’s climbdown, concession or victory (depending on your framing) over Greenland has seen him relent on his threat to impose new tariffs on the UK and others. Those would have resulted in a total 20% (an additional 10% on the existing 10% announced last April) tariff on UK goods coming into the US from next week and, it was threatened, a 35% tariff from June.
Instead, the “workstreams” agreed with Nato’s Secretary General on the future of the Arctic territory clear the way for progress on the trade deal confirmed last May and partly put into force in June. The months ahead should see the remaining parts and finer details of both the UK and EU deals formalised in legislation.
That’s welcome and far preferable to the alternative on offer last week. But British businesses probably shouldn’t get too excited.
Progress on pharma: Tariff-free drugs at a price
On the one hand, there has been at least some concrete progress. As well as the June agreement that set quotas for UK cars, December also saw another important part of the deal.
The agreement in principle on pharmaceutical pricing announced in December was ostensibly about addressing NHS pricing for US drugs, by adjusting the rebate rate: a percentage of UK revenues that drug firms pay to the NHS to reduce its costs. As the Association of the British Pharmaceutical Industry pointed out in a report last June, the UK’s 22.9% rebate rate is considerably higher than equivalents in European neighbours such as France (5.7%), Germany (7%), Italy (6.8%) and Spain (7.5%).
Under the terms of the December deal, Britain has agreed to keep its rebate rate at a maximum of 15% until 2028, and in practice has cut it to 14.5%.
That could be a win-win in itself, unlocking innovation and potentially investment in the UK from pharma businesses previously deterred by the country’s reluctance to pay the price for developing new drugs. But the other part of the agreement also formalised promises in May’s trade deal on keeping pharmaceuticals out of the new tariffs.
“In exchange for these and other commitments, the United States has agreed to exempt UK-origin pharmaceuticals, pharmaceutical ingredients, and medical technology from Section 232 tariffs and will refrain from targeting UK pharmaceutical pricing practices in any future Section 301 investigation for the duration of President Trump’s term,” the agreement reads.
Trump’s behaviour over Greenland casts a long shadow. There is little to stop him reaching for the threat of tariffs again.
Still not much of a trade deal
On the other hand, the US trade deal still only gets two cheers for a couple of reasons.
The first is that, as we noted at the time, as a “trade deal”, May’s agreement is not only light on detail, but what detail there is disappoints.
The House of Commons Business and Trade Committee report on the deal in September was explicit about the problems: While there’s now more clarity for pharmaceuticals, future tariff regimes on steel, aluminium and other industries remain uncertain; in some respects, and for some sectors, the EU’s deal with the US also secured better terms than the UK; and the future timetable for implementation is still unclear.
“We must now turn paper promises into a binding bargain,” the Committee’s report recommends.
Crucially, as it notes, “UK exporters are now trading with our most significant single trading partner on terms which are worse than before President Trump came to office.”
Any trade deal after Trump’s “Liberation Day” in April 2025 was always just about damage limitation.
The other reason for caution is that Trump’s behaviour over Greenland casts a long shadow. There is nothing to suggest that his desire for “full control” of Greenland is diminished, and if the discussions with NATO don’t progress as he’d like, there is little to stop him reaching for the threat of tariffs again – or, perhaps, some other reason. As we’ve said, political risks aren’t going away in 2026.
For now, the US trade deal is back on track, but after Greenland, we now know how bumpy that track can quickly become.
At home with international trading
A global lens for all your international needs.
Talk to our customs experts today or download our guide to international expansion.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2025/26.