US-UK Trade Deal Reached, But What's Next?

The White House is hailing the first trade deal with the UK even as the 90-day pause on reciprocal tariffs ticks down, but despite its potential as a precursor to future deals, markets remain unconvinced.

How Significant Is the Deal?

Markets initially cheered the announcement of a , the first since "reciprocal" tariffs were introduced on 2nd April and later granted a 90-day renegotiation window. Although the event had been widely telegraphed, enabling traders to position ahead, once the details emerged. Interestingly, the 10% levy would remain, and further negotiations would be required. However, additional exceptions would take place. This suggests that the trade deal provided a framework agreement and did not see a significant reduction in tariffs.

On the positive side, the trade deal signalled progress towards securing trade deals that could avert tariff increases and might serve as a model for future agreements. However, in the case of the deal with the UK, this was a relatively straightforward arrangement given that the US enjoys a positive trade balance with the UK. Additionally, President Donald Trump has already stated that implying that other countries could face higher duties. He also dismissed the notion that this deal could serve as a template for others.

Should Trade Partners Be Hopeful?

Given the countries' close ties, another trade situation closely watched by markets is that of the US and Canada. Prime Minister Mark Carney met with President Trump on Wednesday, . The 25% non-energy tariff (10% on energy) applies only to products not already covered by the USMC, with Mexico finding itself in a similar position.

As far as China goes, conflicting reports have emerged over the past couple of weeks about whether the countries are even discussing easing trade tensions. US officials have stated that talks are ongoing, while their Chinese counterparts have denied this. On Thursday, Trump said he "might" speak with Chinese President Xi Jinping over the weekend and that . This follows the two sides agreeing and publicly confirming they would meet in Switzerland for talks.

As for other deals, , but additional tariffs could still be implemented. Beyond the already mentioned tariffs, the US is imposing a 25% across-the-board tariff on auto, steel, and aluminium imports (with certain exceptions). Additionally, the Administration is still studying the possibility of adding 25% tariffs on pharmaceutical and semiconductor imports, with no set date. An investigation into tariffs for wood, timber, and lumber products is expected to conclude in late November. And while touting a minerals deal with Ukraine, the US is also considering adding tariffs on "critical minerals and derivatives," with no set date for when those tariffs could be applied.

Meanwhile, the EU is subject to the 10% global tariff and has recently drawn up a list of if the US proceeds with its "reciprocal" tariffs scheduled for 8 June if the 90-day grace period is not extended – a move Trump has said he is willing to make. The US had a $235.6 billion trade deficit with the EU last year. Following the deal with the UK, some are hopeful that a trade deal with the EU will be next. However, fibre has been trading sideways since the 90-day moratorium, and there are no signs of optimism in the short term either.

EURUSD Breakdown Could Pave the Way to 1.10

The triangle breakdown in EURUSD might open the door to the 1.10 level, which mirrors the length of the first descending leg from 1.1580 to 1.1310. But following a new regional low post-triangle breakout at 1.1195, the bottom might already be in. If the triangle's bottom at around 1.13 is breached, it might expose the triangle peaks at 1.1380 and 1.1430 and eventually the 2025 high.

Source: SpreadEX / EURUSD

Key Takeaways

The trade deal between the US and UK is seen as positive, but it is still just a framework agreement with limited tariff reductions and a rather straightforward agreement. As such, it has left markets uncertain about the prospects for resolving trade issues with larger trading partners like the EU and China. Trump's stance, in fact, suggests a willingness to impose higher tariffs, and as negotiations continue, the outcome will impact trade dynamics and how markets, including the EURUSD pair, will react.