UK Holds Off on Counter-Tariffs as US Moves Forward with Steel Levies

UK Holds Fire: Starmer’s Calculated Gamble on US Steel Tariffs

A Tactical Pause or a Strategic Misstep?

The UK government has decided not to impose immediate counter-tariffs if the United States moves ahead with a 25% global tariff on steel and aluminum imports.

Prime Minister Keir Starmer is taking a “cool-headed” approach, avoiding knee-jerk retaliation in hopes of securing a UK exemption and preventing a full-blown trade conflict with Washington. This move contrasts sharply with previous responses to US tariff measures, raising both optimism and alarm across political and industrial circles.

The Stakes: What’s at Risk for the UK?

A Market That Matters—but Not Massively

The United States is a key buyer of UK steel, but the numbers paint a nuanced picture:

• 182,000 tonnes of UK steel were exported to the US in 2024.
• This accounts for just 7% of total UK steel exports by volume and 9% by value (worth over £400 million).
• The US aluminum market is even smaller for the UK, at 10% of total exports, worth £225 million.

While these figures show the US market is significant, they also suggest that outright confrontation may not be necessary. Instead, Starmer’s government is betting that diplomatic engagement can yield better results than hasty retaliation.

UK’s Game Plan: A Balancing Act

Holding Off Retaliation—For Now

Rather than mirroring Trump’s tariffs with immediate countermeasures, Starmer is prioritizing backdoor negotiations. He has already personally urged President Trump to exempt British steelmakers from the tariffs. Meanwhile, Business and Trade Secretary Jonathan Reynolds is expected to:

• Highlight existing UK government support for the steel industry.
• Address Parliament on Wednesday if the US tariffs take effect.
• Point to the government’s £2.5 billion steel industry investment plan and the upcoming energy cost cap for steelmakers.

Learning from 2018: A New Approach

The UK’s stance today contrasts with 2018, when it (then part of the EU) swiftly imposed retaliatory tariffs on iconic US products after Trump enacted similar steel duties. Those measures were suspended in 2022 following a deal with the Biden administration, allowing 500,000 tonnes of UK steel to enter the US tariff-free each year.

This time, the UK is keeping its options open, prepared to reactivate the suspended tariffs if necessary but opting for restraint in the immediate term.

Industry Reaction: Caution and Frustration

Steelmakers & Aluminum Producers Worry About a Slow Response

Not everyone is convinced by Starmer’s measured approach. UK Steel, the industry lobby group, has called the situation “disappointing.”

“British steel exports to the US are vital… a delayed response could be a devastating blow to our industry,” said UK Steel’s Director General.

Some UK producers are already seeing US customers hesitate on new orders due to the uncertainty of looming tariffs. The Aluminium Federation has echoed these concerns, warning of early signs of trade disruption and possible market shifts away from the UK.

Investor & Market Impact: What Comes Next?

Protectionism Rising in a Fractured Global Trade Landscape

Trump’s tariff revival is part of a larger trend toward protectionism, where national security and domestic politics override free trade. For investors, this signals volatility. Key risks include:

• Supply chain disruptions for industries reliant on UK steel and aluminum.
• Increased costs for downstream manufacturers (automotive, construction, etc.).
• Market shifts, as steel and aluminum originally destined for the US get redirected elsewhere, including flooding the UK market.

Short-Term Market Response: Currencies, Stocks & Trade Flow

• UK steelmakers’ stocks could face short-term pressure as the industry adjusts.
• The British pound may weaken slightly if market confidence in UK trade policy wavers.
• Global investors will watch whether Starmer’s bet on diplomacy yields exemptions or backfires.

Long-Term Outlook: Could the UK Be a Trade Neutral Hub?

By avoiding immediate tariffs, the UK may position itself as a stable trade partner amid increasing US-China-EU economic fragmentation. If Starmer’s non-escalation strategy pays off, it could bolster the UK’s standing as a flexible, trade-friendly economy.

However, if Trump continues aggressive tariff policies, the UK may eventually have to retaliate, risking deeper trade frictions.

A High-Stakes Gamble

Starmer’s decision to hold fire on counter-tariffs is a calculated gamble. The move could:

• Win exemptions through diplomatic engagement.
• Preserve broader US-UK trade relations.
• Avoid a costly tit-for-tat trade war.

However, if negotiations fail, the UK steel industry could suffer, and Starmer’s government may face criticism for appearing weak on trade defense.

The next few weeks will determine if this strategy is a masterclass in patience—or a costly mistake. Investors, manufacturers, and policymakers alike are watching closely. Will Washington grant the UK an exemption, or will Starmer be forced to strike back?