Updated February 17, 2022
U.S.-UK Trade Relations
The United Kingdom (UK) is a major U.S. trade and
faced post-Brexit trade disruptions. The UK economy may
economic partner. Given their scope, size, and economic
grow more slowly (4.7% projected) in 2022, but faster than
and political significance, U.S.-UK trade relations are of
many other advanced economies, including Germany and
congressional interest. Areas of inquiry may include U.S.
the United States (3.8% and 4.0% growth projected in 2022,
efforts to: address specific bilateral trade issues; potentially
respectively). Continued pressures on the UK economy may
seek more U.S.-UK trade liberalization; and strengthen
include supply disruptions, labor shortages, and inflation.
relations with the UK, among other allies, including by
The effects of COVID-19 and Brexit on the UK economy
addressing global trade challenges of shared concern.
have been difficult to disentangle. While pandemic effects
UK Economy
may be short-term, an official UK estimate suggests that
At $2.8 trillion in gross domestic product (current U.S.
UK productivity may be 4% lower long-term due to Brexit.
dollars) in 2020, the UK was the world’s fifth-largest
U.S.-UK Trade and Investment Ties
economy and Europe’s second-largest, after Germany.
In 2020, the UK was the United States’ seventh-largest
Services comprised 80% of the UK economy. In 2020, the
goods trading partner by country, and its largest services
UK economy shrank by 9.4%, the largest contraction of
trading partner. The UK comprised 5% of total U.S. trade,
many advanced countries, amid the Coronavirus Disease
and the United States was nearly one-fifth of total UK trade
2019 (COVID-19) pandemic and the UK’s withdrawal from
(see Figure 1). The EU, as a bloc, was each country’s
the European Union (EU) (“Brexit,” see textbox).
largest trading partner.
Brexit: Key Facts and Changes
Figure 1. Share of U.S. and UK Total Trade
On January 31, 2020, the UK withdrew from the EU. After a
transition period, the UK left the EU single market and customs
union on January 1, 2021, regaining control over its trade policy.
Brexit outcomes have major implications for UK trade ties.

UK-EU Trade and Cooperation Agreement (TCA)
 Avoids the severe disruption that may have occurred if trade
had reverted to World Trade Organization (WTO) terms.
 Does not replicate EU single market access. Adds new trade
frictions, e.g., border checks and regulatory requirements.
 Leaves some issues uncertain, including UK financial services
firms’ continued access to the EU—previously through a
“passporting” to access the EU markets without setting up
legally separate subsidiaries.


Northern Ireland-EU Trade Protocol
Source: CRS, data from the U.S. Bureau of Economic Analysis (BEA)
 Aims to keep an open border on the island of Ireland, while
and the UK Office for National Statistics (ONS).
protecting the EU single market.
Note: Parts may not sum to whole due to rounding.
Implementation has disrupted some trade between Northern
According to U.S. Bureau of Economic Analysis (BEA)
Ireland and the rest of the UK, and raised tensions within
data (values rounded), in 2021, total U.S goods trade with
Northern Ireland and between the UK and the EU. (For more
the UK was $118 billion ($61 billion in exports, and $56
information, see CRS Report R46259, Northern Ireland: The Peace
billion in imports) (see Figure 2). This exceeded the 2020
Process, Ongoing Challenges, and U.S. Interests.)
level (total of $109 billion, with $58 billion in exports and

UK in the WTO
$50 billion in imports), but it did not reach the pre-
 Founding WTO member. Previously, within the EU’s goods
pandemic and pre-Brexit level. In 2020 (latest data), total
and services “schedules” (e.g., tariff concessions). Now, has its
U.S.-UK services trade was $115 billion ($63 billion in
own schedules, on which it negotiated with WTO members.
exports, and $53 billion in imports). In recent years, each
 Has continued its participation, in its own right, in the WTO
country’s trade data has shown an overall trade surplus with
plurilateral Government Procurement Agreement.

the other. Such asymmetries can arise for many reasons,
UK-Non-EU Trade and Broader Trade Interests
including differences in source data and coverage.
 The UK is replicating with other countries EU trade deals that
no longer apply to the UK, and also pursuing new trade deals.
In 2020, top U.S. goods exports were nonferrous metals
 For example, the UK signed trade deals with Australia and
(excluding aluminum), aerospace products and parts, and
Japan, and applied to join the Comprehensive and Progressive
oil and gas; and top U.S. goods imports were
Agreement for Trans-Pacific Partnership (CPTPP), formed after
the U.S. withdrawal from TPP in 2017. Other priorities have
pharmaceuticals, motor vehicles, and aerospace products
included pursuing trade negotiations with the United States.
and parts. Financial services, various business services,
 The UK seeks to rebalance non-EU trade ties, grow UK
transport, intellectual property rights (IPR), and travel—
exports, and develop UK supply chains, among other aims.
which has been constrained by the pandemic—historically
have comprised a large share of bilateral services trade.
The UK economy rebounded by 7.2% in 2021, a year in
which the UK lifted COVID-19-related restrictions, but also
https://crsreports.congress.gov

---

U.S.-UK Trade Relations
Foreign direct investment (FDI) is a key aspect of bilateral
two countries should replicate a U.S.-EU deal on parallel
trade. In 2020, the UK was the top destination, by country,
issues that replaces U.S. steel and aluminum tariffs with a
for U.S. FDI. In 2020, the U.S. FDI stock in the UK was
tariff-rate quota system and commit to cooperation on
$890 billion, and the UK FDI stock in the United States was
related global overcapacity and carbon emissions issues.
$487 billion. UK financial and insurance sectors, and non-
Other Issues. The United States and the UK aim to
bank holding companies, have drawn most U.S. FDI, as has
deepen their partnership to facilitate cross-border data flows
the U.S. manufacturing sector for UK FDI. U.S. and UK
while ensuring data protections. They also are working with
affiliate activity supported 2.7 million workers in the two
other partners on global supply chain challenges. Their
countries in 2019. (BEA data.) More than 7,500 U.S. firms
views may vary on some trade issues. For instance, the
have a UK presence, which can act as a hub for activity in
Biden Administration has voiced support for the concept of
Europe, the Middle East, and Africa. Brexit and its
a limited IPR waiver in the WTO for COVID-19 vaccines
aftermath have presented uncertainty for many U.S. firms.
(but some Members of Congress disagree). The UK has
Figure 2. U.S.-UK Trade and Investment
favored other responses to support vaccine access.
Potential U.S.-UK Trade Agreement. Brexit opened
up the possibility of a U.S.-UK free trade agreement (FTA).
The Biden Administration has been reviewing the bilateral
trade negotiations that occurred during the Trump
Administration under the latest Trade Promotion Authority
(TPA, which expired in 2021). The two countries held five
negotiation rounds in 2020, but did not reach a final FTA.
For the UK, a trade deal with the United States has been a
major priority to showcase its post-Brexit competitiveness.
Some experts are optimistic about the success of any future
U.S.-UK FTA negotiations, given historical similarities in
U.S. and UK trade approaches, but flashpoints could

reemerge in such talks. Many in U.S. industry see an FTA
Source: CRS, based on U.S. Bureau of Economic Analysis data.
as a way to enhance market access and regulatory
Bilateral Trade Issues
alignment. Other stakeholders, including in UK civil
The United States and the UK historically have been
society, oppose perceived efforts to weaken UK
leading forces for global trade liberalization. Their trading
regulations. An active issue in this regard is UK agricultural
relationship is relatively open, but some tariff and non-tariff
market access and food safety regulations. Another
barriers remain. While their trade policies are aligned on
flashpoint may be trade in pharmaceuticals. While the
many fronts, frictions emerge periodically on specific
United States had sought full, transparent, and non-
issues, such as on tariffs during the Trump Administration.
discriminatory access to the UK pharmaceutical market,
President Biden has “conveyed his intention to strengthen
some in UK civil society feared that an FTA would
the [U.S.-UK] special relationship ... and revitalize trans-
privatize health services and raise drug prices, despite
atlantic ties.” The two countries signed a “New Atlantic
assurances from UK officials that these issues were not up
Charter” in 2021 that emphasizes “open and fair trade.”
for negotiation. Financial services, e-commerce, and
investment may be among other contentious areas.
Trade Frictions and Resolutions. In June 2021, the
United States and the UK reached an understanding on a
Selected Issues for Congress
cooperative framework to address their long-running
Members may continue to monitor U.S. trade and economic
dispute in the WTO over civilian aircraft subsidies to
interests at stake in the TCA’s implementation. They also
Boeing and Airbus, respectively. They agreed to suspend
may consider whether to press the Administration to
dispute-related tariffs while seeking a longer-term solution,
continue to prioritize resolving specific trade issues, and/or
and to cooperate on related challenges posed by non-market
renew broader U.S-UK FTA negotiations. In doing so, they
economies, such as China. The United States and the EU
may examine the potential benefits and costs of further
reached a similar, separate understanding on parallel issues.
U.S.-UK trade liberalization (or its absence) for the firms
In a November 2021 political agreement, the UK pledged to
and workers in their districts and states.
transition from its digital services tax (DST)—taxes on
Many in Congress and in U.S. industry support a U.S.-UK
revenues that certain companies generate from providing
FTA. Many Members tie their support to ensuring that
digital services—to a new global tax framework (which
Brexit outcomes do not undermine the Northern Ireland
signatories must take steps domestically to implement). In
peace process. A potential TPA renewal debate could
exchange, the United States canceled additional, already
heighten these issues. If FTA talks proceed, Congress may
suspended duties on certain imports from the UK. The
monitor and shape them, and consider implementing
duties arose from a U.S. “Section 301” investigation,
legislation for a final agreement. Additionally, Members
prompted by concerns that the UK’s DST unfairly targeted
may examine other ways to engage further on bilateral and
U.S. firms. The United States reached similar political
global trade issues of shared concern, e.g., sectoral
agreements with some other countries, including in the EU.
regulatory cooperation or dialogues.
The United States and the UK are working to address
frictions over U.S. “Section 232” tariffs on steel and
Shayerah I. Akhtar, Specialist in International Trade and
aluminum imports from the UK, and UK retaliatory tariffs
Finance
on some U.S. exports. Stakeholders disagree on whether the
https://crsreports.congress.gov

---

U.S.-UK Trade Relations

IF11123


Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF11123 · VERSION 11 · UPDATED

---