Economy & Business Politics & Diplomacy Trade United Kingdom United States and Canada
New Atlanticist January 27, 2025

The case for a US-UK trade and investment agreement

By L. Daniel Mullaney

On his first day back in the Oval Office, US President Donald Trump signed the America First Trade Policy executive order. The order directs the US trade representative to identify countries with which the United States can negotiate bilateral or sectoral market access agreements, and to make recommendations regarding such potential agreements.  

These recommendations should include a comprehensive trade and investment agreement between the United States and the United Kingdom. 

This year, with a weakened World Trade Organization and the prospect of increased tariff and nontariff barriers in the United States and perhaps elsewhere, a comprehensive US-UK trade agreement could increase bilateral trade and investment, grow both economies, and render proposed tariff increases unnecessary. But such a win-win agreement would have to be based on three pillars: 

  1. appropriate guardrails for liberalized bilateral trade;
  2. regulatory compatibility, based on bilateral recognition of product standards and conformity assessment; and
  3. a united front in confronting nonmarket economy policies and practices.  

Why the United Kingdom and the United States?

The United States and the United Kingdom are already significant trading partners, with goods and services trade totaling $295.6 billion in 2022. They both have high regulatory and labor standards and strong digital services sectors, meaning that an agreement is an opportunity to negotiate high-level and technologically meaningful obligations with little risk of losing manufacturers to regulatory arbitrage. Notably, bilateral US-UK trade in goods is already evenly balanced. This means that a significant justification for additional US tariffs—and a primary focus of the America First Trade Policy executive order—is absent in the case of the United Kingdom. 

Also exceptional among US trade relationships, there has been a consistent view in the United States that a US-UK trade agreement would be valuable. The first Trump administration launched formal negotiations with the United Kingdom and completed six rounds, stopping only with the 2020 election. The Biden administration likewise explored a broad trade initiative with the United Kingdom, which was only thwarted by Brexit-related controversies over the Irish land border and turnover in the UK government. Neither of these impediments remain.  

In short, the United Kingdom is the right partner, and now is the right time. 

Why these three pillars?

1. Guardrails: Both the United States and the United Kingdom have politically sensitive sectors for which the threat of significant import increases would be dealbreakers; both parties would need to accommodate the need for guardrails for those sectors. 

These sectors would likely include agriculture and healthcare for the United Kingdom and automobiles for the United States. For automobiles from the United Kingdom, special rules of origin for qualifying automobiles may be necessary to ensure that third countries of concern cannot free-ride on a UK-US agreement. For agriculture from the United States, there could be greater liberalization for products that comply with high-level regulatory requirements, so that high-cost regulatory requirements in one country are not undercut by imports from the other. In both cases, a safeguard provision in the event of import surges might be appropriate. In the case of healthcare, safeguards or assurances with respect to privatization may be appropriate. 

The key point is that it is possible to liberalize these sectors while introducing necessary guardrails; the fact that these sectors are sensitive is not a reason to avoid a trade and investment agreement.

2Regulatory compatibility: There are two important aspects of regulatory compatibility that a US-UK agreement should ensure. First, it should both remove and avoid unnecessary regulatory barriers between the United States and the United Kingdom—that is, those barriers not relevant to a legitimate policy objective. This would increase US and UK bilateral exports, creating growth and supporting high-paying jobs while ideally maintaining balanced trade. 

Second, regulatory compatibility with the United States should establish clearly that the United Kingdom is “dual facing”: as able to accept US products that satisfy its regulations as it is to accept European Union (EU) products.  

This is a critical point: Some proponents of a new EU-UK trade agreement suggest an arrangement in which UK regulations remain “dynamically aligned” with EU regulations to facilitate trade flows. But the result would be that the United Kingdom has the same significant regulatory barriers to US exports as the EU. This obligatory alignment is unnecessary for the United Kingdom; it is a price EU member states pay for EU membership. 

As a non-EU member but a trusted trading partner with high regulatory standards, the United Kingdom should be able to adopt its own sovereign product regulatory regimes for its own domestic market. But it can and should do this while at the same time offering assurance in a trade agreement with the EU—through trusted trader programs and other mechanisms—that products shipped to the EU comply with EU regulations.  

In other words, the United Kingdom does not have to choose between the United States and the EU when it comes to an agreement that increases trade by reducing regulatory barriers.  

This approach to regulatory compatibility would allow the United Kingdom to increase trade with both the United States and the EU. It would allow the United States to increase its exports to the United Kingdom in a way that Washington was unable to accomplish in negotiations with the EU. In other words, both sides win.  

3. Coordination on nonmarket economy policies and practices: Harmful nonmarket economy policies and practices are a significant, if not the most significant, driver of pressure for additional tariff protection and a major focus of the America First Trade Policy executive order. But coordinating defensive measures with like-minded allies is a more effective strategy than acting alone. Moreover, the combined effect of different defensive measures from different partners is more effective than any one tool, including tariffs.

So, a US-UK trade and investment agreement should have provisions on coordinating each party’s various measures to protect against and disincentivize economic coercion, nonmarket excess capacity, subsidies, harmful state enterprise activities, and forced technology transfer. This coordination would make the imposition of bilateral tariffs unnecessary and even counterproductive.

The way forward

The coming years will accelerate the disruption of international trade norms and institutions among many if not most trading partners around the world. But given the significant trade volume and balance in goods trade, and the similarities of their economies, the US-UK relationship lends itself to deepening, rather than disruption, in the years to come. A US-UK comprehensive trade and investment agreement, one that is based on the appropriate pillars that address shared challenges, would minimize disruption to the bilateral relationship and strengthen trade ties between the two countries.


L. Daniel Mullaney is a nonresident senior fellow with the Atlantic Council’s Europe Center and GeoEconomics Center.

Further reading

Image: Police officers line The Mall near Buckingham Palace, London, during the first day of US President Donald Trump's state visit to the UK.