Trump warned he may tear up last year’s US–UK trade deal. The remark links the pact to Britain’s stance on the Iran conflict. Markets and ministers have been unsettled by the threat.
Shock lines from the president
Donald Trump, President of the United States, told an interviewer in April 2026 that the economic agreement the US struck with the UK last year could be altered or revoked if relations don't improve. He said the deal was “better than I had to” and added that it "can always be changed", tying the pact to British decisions over the conflict with Iran.
This wasn't idle chatter — Trump framed the trade deal as leverage tied to Britain’s choices over Iran. The deal signed in May 2025 offered the UK relief from certain US tariffs on cars, steel and aluminium. But Mr Trump’s remarks mean those concessions — already only partially implemented in practice — could be reopened as a bargaining chip.
Why ministers are worried
Keir Starmer, Prime Minister of the United Kingdom, has defended the agreement as a marker of close ties with the US. Yet relations have frayed after Britain declined to join US strikes against Iran, according to the president, and ministers in London have described the situation as deeply frustrating.
Rachel Reeves, Chancellor of the Exchequer, said she was "frustrated and angry" that the US launched strikes without a clear set of objectives, a view she expressed while in Washington for International Monetary Fund meetings. Her words underline how foreign policy rows are now bleeding into economic policy.
Markets, industries and the tariffs thread
The looming threat of revived tariffs has direct implications for UK industry.
William Bain, head of trade policy at the British Chambers of Commerce, said that businesses would welcome a deal that kept tariffs low, noting the particular advantages to the automotive and pharmaceutical sectors if duties stayed down.
Cars and medicines make up a large share of the UK's exports, so any tariff shifts would matter to manufacturers and drug companies. Automotive exporters rely on predictable duties when they price vehicles and negotiate supply contracts across Europe and beyond. Pharmaceutical groups also face complex supply chains and regulatory hurdles where extra import costs can ripple through margins and R&D budgets.
Trump's administration has a recent history of resorting to steep import taxes. In a prior term the president imposed a 25% levy on steel and aluminium, a step that strained ties with allies and prompted talks designed to shield the UK from the worst effects. The 2025 agreement was partly born from that background.
Partial implementation keeps uncertainty alive
Not everything in the 2025 pact has been put into force. Some tariff relief — notably full removal of certain steel duties — remains incomplete. That means exporters are still exposed to policy shifts in Washington, and traders are pricing in additional risk.
When governments delay putting deals into practice, exporters delay investment and renegotiate contracts — firms hate policy uncertainty. Companies plan capital spending, hire staff and set supply arrangements on the assumption of stable rules. Any reopening of terms by the US would force firms to reassess multi-year plans.
Energy costs and the bigger economic picture
Mr Trump also criticised the UK’s energy and immigration policies, arguing they have damaged economic prospects. Keir Starmer has said he is “fed up” with actions abroad that he blames for pushing energy bills higher.
The president suggested Britain made a "tragic mistake" in moving away from North Sea oil and gas production, comments that cut across the government’s green agenda and have immediate economic resonance. Higher energy costs feed directly into household bills and operating expenses for firms, particularly energy-intensive manufacturers.
Some ministers and officials in London worry that the combination of conflict-related shocks and a potential breakdown in the US relationship could make the UK more exposed than other G7 economies. One senior Treasury figure said privately — and on the record elsewhere — that rising global uncertainty increases the risk of weaker growth, and that would hit the UK hard because of its trade and services mix.
Diplomacy, a royal visit and political theatre
King Charles’s state visit to the US later in April 2026 is due to proceed amid the diplomatic strain. The timing has turned ceremonial engagements into heavy diplomatic theatre — and Mr Trump’s comments have added an awkward subtext.
Sir Keir has been leaning closer to the European Union on economic and security questions, arguing that a stronger relationship with the EU offers tangible benefits at a time of global volatility. That tilt is being watched in Washington, and the president’s rebuke may push London to weigh its options even more carefully.
What business groups say
William Bain, head of trade policy at the British Chambers of Commerce and a former Labour MP and minister, described the initial 2025 agreement as an "important first step" for business. He said seeing leaders find common ground on economic priorities helps negotiations, and emphasised that keeping tariffs low would help sectors such as cars and medicine.
Bain added that trade talks are often as much about relationships as details on paper. Put simply: the relationship between leaders now shapes trade outcomes, and British businesses are watching those ties closely.
How reopening the deal could play out
If the US were to reopen or rewrite the agreement the practical options vary.
Washington could impose new tariffs, delay commitments such as duty relief, or press for greater access to British markets for agricultural goods. Each route would alter the calculus for UK firms and could spark retaliatory measures.
The US would lose out too: tighter trade would cut demand for American exporters, including firms selling services and tech to UK customers. The trade relationship is reciprocal; both sides would face adjustment costs if the framework unravels.
Businesses brace but hope for stability
Many industry groups are publicly hopeful that leaders will find common ground. Business leaders prefer predictability: stable tariffs, clear rules for goods and services, and a known timetable for implementing agreements. Uncertainty drives up hedging costs and raises the discount rate firms use when evaluating investment projects.
The coming weeks look set to test whether diplomacy can stitch relations back together or whether trade policy becomes the area where political anger is turned into economic pressure. Either way, markets and exporters will be watching diplomatic signals closely as they price risk for the rest of 2026.
Related Articles
“We gave them a good trade deal,” Donald Trump, President of the United States, said, adding: “which can always be changed.”
This article was created with AI assistance.
