One of the most important things I take from this trade deal with the UK is this quote from Trump:
- 10% base rate for UK not a template for other countries; template of 10% is probably the lowest end
- 10% tariff set for U.K. is ‘low number,’ will be higher for other countries
So, It seems 10% baseline tariffs are indeed the floor for most imports, with potentially higher tariffs for some countries or sectors. The market has been celebrating this positive trade deal news, but a 10% baseline tariff is still ~410 billion headwind, a ~1.4% of GDP, 2% of spending, and 12% of profits.
I still expect this if is indeed the case to be a significant headwind to the economy (but for sure much less than previous numbers), and growth to come close to zero or even negative for some quarters later in the year or early 2026 (meaning at this point I only expect a shallow recession, not a full blown recession), which it seems to me is something the market is currently ignoring (earnings still expected to be 9% in 2025 and 13.5% in 2026)
As a reference also, the US has a trade surplus with the UK of 11B, so this was probably an easier trade deal, where Trump could make more concessions. China,the EU, and Japan are probably not as easy where there is significant trade deficits.