Updated February 28, 2023
U.S.-UK Trade Relations
The United Kingdom (UK) is a major U.S. trade and
Brexit has presented trade disruptions and adjustment costs
economic partner. U.S.-UK trade and investment ties—
for some firms. The economic effects of Brexit have been
given their scope, size, and economic and political
challenging to disentangle from the other developments
significance—are of oversight and legislative interest for
such as the effects of the COVID-19 pandemic. An official
Congress. In the 118th Congress, Members may assess
UK estimate suggests that UK productivity may be 4%
opportunities for expanding U.S.-UK trade and investment
lower long-term due to Brexit.
ties, including through ongoing dialogues and a potential
bilateral free trade agreement (FTA). They also may assess
U.S.-UK Trade and Investment Ties
U.S.-UK efforts to address specific bilateral trade frictions
The United States and UK are key trading partners, but
and global trade challenges of shared concern.
each country trades more with the EU than each other (see
Figure 1 for select U.S. trade data). The UK was the United
UK Economy
States’ seventh-largest overall trading partner for goods in
In 2022, the UK slid one spot to rank as the world’s sixth-
2022, and its largest overall services trading partner in 2021
largest economy (International Monetary Fund, IMF,
(latest data available), by country. In terms of the UK’s
estimated data for gross domestic product, GDP, current
goods and services trade, in 2021, the United States was the
prices). Services industries account for 80% of the UK’s
UK’s largest trading partner, by country, accounting for
economic output (2021 data, UK Office for National
21% of the UK’s exports and 12% of its imports; the EU
Statistics, ONS). In 2022, real GDP in the UK grew an
bloc accounted for 42% of the UK’s exports and 45% of its
estimated 4.1% (IMF data). During that year, the UK faced
imports (based on ONS data).
political upheaval and financial instability with the
Figure 1. U.S. Goods and Services Trade with Select
changeover of three different prime ministers, alongside
Trading Partners, 2021
continued economic pressures including supply disruptions,
slowing business investment, labor shortages, and inflation.
The UK economy is forecast to contract in 2023 (-0.6%,
according to the IMF).
A major development for the UK’s economy and external
trade relations has been “Brexit,” the UK’s departure from
the European Union (EU) on January 31, 2020. After a
transition period, the UK left the EU single market and
customs union on January 1, 2021, regaining control of its
trade policy. The Trade and Cooperation Agreement (TCA)
underpins the UK-EU post-Brexit trade and economic
relationship. The TCA avoids the severe disruption

anticipated if UK-EU trade had reverted to World Trade
Source: CRS, with U.S. Bureau of Economic Analysis (BEA) data.
Organization (WTO) terms. Yet, it does not replicate EU
According to the Bureau of Economic Analysis (BEA), in
single market access and adds new border checks and
2022, total U.S. goods trade with the UK was $141.3 billion
regulatory requirements. The TCA did not fully address
($77.3 billion in exports, $64.0 billion in imports) (see
some issues, including financial services. UK-EU efforts to
Figure 2). Top U.S. goods exports included oil and gas;
reach a deal on regulatory cooperation on financial services
nonferrous metals (excluding aluminum), and aerospace
have stalled, to date.
products and parts; and top U.S. goods imports included
A point of friction has been the Ireland/Northern Ireland
pharmaceuticals and medicines, motor vehicles, and
Protocol of the UK-EU Withdrawal Agreement. The
aerospace products and parts (U.S. International Trade
Protocol keeps Northern Ireland, unlike the rest of the UK,
Commission data). Total U.S.-UK services trade in 2021
aligned with some EU trade rules to maintain an open
(latest data available from BEA) was $128.8 billion ($67.8
border on the island of Ireland, while trying to ensure the
billion in exports, $61.1 billion in imports). Financial
integrity of the EU single market. Implementation of the
services and various other business services were the top
Protocol has disrupted some trade between Northern Ireland
traded services bilaterally.
and the rest of the UK, and raised tensions within Northern
Foreign direct investment (FDI) is a key aspect of bilateral
Ireland and between the UK and the EU. In February 2023,
trade. By country, the United States and UK are each
the UK and EU reached a framework agreement to address
other’s largest foreign investors. In 2021, the U.S. FDI
challenges posed by the Protocol, including to ease checks
stock in the UK exceeded $1 trillion, and the UK FDI stock
on certain goods entering Northern Ireland; the deal
in the United States was $512.4 billion (historical-cost
requires formal UK and EU approval. (See CRS Report
basis). UK financial and insurance sectors, and non-bank
R46259, Northern Ireland: The Peace Process, Ongoing
holding companies, have drawn most U.S. FDI, as has the
Challenges, and U.S. Interests, by Kristin Archick.)
https://crsreports.congress.gov

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U.S.-UK Trade Relations
U.S. manufacturing sector for UK FDI. U.S. and UK
Reduction Act of 2022) could discriminate against foreign
affiliates supported 2.7 million workers in the two countries
manufacturers.
in 2020 (BEA data). In 2022, more than 7,500 U.S. firms
In 2022, the United States and UK launched the “U.S./UK
had a UK presence, which can act as a hub for activity in
Dialogues on the Future of Atlantic Trade,” to further
Europe, the Middle East, and Africa.
deepen bilateral trade ties and cooperate to address shared
Figure 2. U.S.-UK Trade and Investment
challenges. They have focused on issues concerning small-
and medium-sized enterprises (SMEs), digital trade, worker
rights, supply chains, food security, and climate. They also
revived a bilateral dialogue on SME trade issues, and
launched a new dialogue on technology and cross-border
data flows. They are cooperating on trade issues with other
partners, such as on supply chains and sanctions and export
restrictions in response to Russia’s war on Ukraine.
UK officials have acknowledged that a bilateral FTA, a
post-Brexit UK priority, is unlikely in the near-term. In the
meantime, the UK is pursuing economic and trade
cooperation with certain U.S. states, such as to support
commercial partnerships, research ties, low-carbon
economies, and sectoral engagement. The UK has signed
memorandums of understanding (MOUs) with Indiana,
North Carolina, and South Carolina, for example.
Should the United States and UK revive bilateral FTA talks,
Source: CRS, with U.S. Bureau of Economic Analysis (BEA) data.
Note. Not adjusted for inflation.
some experts are optimistic that the partners could reach a
deal, given historical similarities in their trade approaches.
Bilateral Trade Issues
Still, flashpoints could reemerge. Some in industry see an
FTA as a way to enhance market access and regulatory
The United States and UK have a relatively open trading
relationship, but some tariff and non-tariff barriers remain.
alignment, while some in civil society oppose perceived
efforts to weaken UK food safety and other regulations.
While U.S. and UK trade policies align on many fronts,
Other contentious areas may include pharmaceuticals,
frictions emerge periodically on specific issues, such as on
tariffs. In 2021, the two countries signed a “New Atlantic
financial services, e-commerce, and investment.
Charter” with a focus on “open and fair trade.” Per the
Selected Issues for Congress
Biden Administration’s 2022 trade policy agenda, the
partners “will continue to deepen their trade relationship”
A key issue for Members may be whether to direct the
Administration to pursue FTA negotiations with the UK.
and address shared concerns related to forced labor in
Considerations may include the potential benefits and costs
supply chains and distortive practices by non-market
of further trade liberalization, the status of U.S.-UK efforts
economies (NMEs). Amid changes in UK leadership and
to resolve bilateral frictions, and the impact of UK FTAs
economic challenges in 2022, President Biden has
with other countries on U.S. commercial competitiveness.
emphasized the enduring nature of U.S.-UK ties generally.
The UK, for instance, has signed new trade deals with
Brexit allowed the UK to regain control of its trade policy
Australia, Japan, and Singapore, and seeks to join the
from the EU, and opened up the possibility of a U.S.-UK
Comprehensive and Progressive Agreement for the Trans-
FTA. In 2018, the Trump Administration formally notified
Pacific Partnership (CPTPP).
Congress under Trade Promotion Authority (TPA) of its
Some Members support a U.S.-UK FTA (e.g., S. 4450,
intent to negotiate an FTA with the UK post-Brexit. In
117th Cong.), and some tie their support to ensuring that
2020, the United States and UK conducted five rounds of
Brexit outcomes do not undermine the Northern Ireland
bilateral FTA negotiations. They did not reach a final FTA,
peace process (e.g., S.Res. 117, 117th Cong.). Potential
but achieved some sector-specific regulatory cooperation.
renewal of TPA, which expired in 2021, could heighten
The Biden Administration has not renewed or initiated
these issues. If FTA talks proceed, Congress could seek to
negotiations. Instead, it has worked to address specific trade
oversee and shape them, and consider legislation to
concerns and engage in other trade initiatives with the UK.
implement a potential final FTA.
In 2021, the United States and UK reached agreements to
Other possible issues include assessing whether current
address the long-running WTO Boeing-Airbus subsidies
U.S.-UK trade dialogues advance U.S. policy interests or
dispute, the UK’s digital services taxes, and U.S. “Section
232” steel and aluminum tariffs initially imposed by the
other approaches are warranted. Options include seeking
broader-based cooperation—potentially modeled on the
Trump Administration. In some of these areas, they also
U.S.-EU Trade and Technology Council, which has
agreed to cooperate on related global economic issues of
working groups to address a range of issues, including
shared concern (e.g., steel oversupply). New frictions have
global trade challenges posed by NMEs—or enhanced
emerged as well. The UK is among a number of trading
sector-specific regulatory cooperation. Members also may
partners that have raised concerns that certain provisions in
examine how UK trade policy engagement at the U.S. state
P.L. 117-169 (commonly referred to as the Inflation
level relates to U.S. trade policy on the UK overall.
https://crsreports.congress.gov

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U.S.-UK Trade Relations

IF11123
Shayerah I. Akhtar, Specialist in International Trade and
Finance


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https://crsreports.congress.gov | IF11123 · VERSION 15 · UPDATED

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