U.S.-UK Trade Relations

U.S.-UK Trade Relations

Updated August 17, 2023
U.S.-UK Trade Relations
The United Kingdom (UK) is a major U.S. trade and
other issues in their post-Brexit economic ties. In June
economic partner. U.S.-UK trade and investment ties—
2023, the UK and EU announced a new memorandum of
given their scope, size, and economic and political
understanding (MOU) to establish a forum for financial
significance—are of congressional interest. In the 118th
services regulatory cooperation.
Congress, Members may assess opportunities to expand
U.S.-UK trade and investment ties, including through
U.S.-UK Trade and Investment Ties
ongoing executive trade initiatives and a potential bilateral
While the United States trades more with North American
free trade agreement (FTA). They also may assess U.S.-UK
partners, the EU, and China than it does with the UK (see
efforts to address specific bilateral trade frictions and global
Figure 1), the U.S.-UK trading relationship is significant,
trade challenges of shared concern.
particularly in terms of cross-border services and affiliate
activity. By country, the UK was the United States’
UK Economy
seventh-largest goods trade partner and largest services
In 2022, the UK slid one spot to rank as the world’s sixth-
trade partner in 2022. Based on UK trade data, the United
largest economy (gross domestic product, GDP, at current
States was the UK’s largest trading partner, by country,
prices; International Monetary Fund, IMF, estimate). Real
comprising 21% of the UK’s exports and 12% of its
GDP in the UK grew an estimated 4.1% in 2022 and is
imports. The EU bloc accounted for 42% of the UK’s
projected to grow 0.4% in 2023 (IMF data). While the UK’s
exports and 48% of its imports.
economy has shown some resilience this year, such as in
Figure 1. U.S. Goods and Services Trade with Select
consumer spending, it continues to face headwinds,
Trading Partners, 2022
including supply disruptions, energy price shocks, business
investment challenges, labor shortages, worker strikes, and
inflation. Brexit also has presented trade disruptions and
adjustments for some firms (see below), but its economic
effects have been challenging to disentangle from other
factors (e.g., the effects of the COVID-19 pandemic).
Brexit. The UK departed 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
Source: CRS, with U.S. Bureau of Economic Analysis (BEA) data.
the severe disruption to two-way trade ties anticipated if
UK and EU had reverted to World Trade Organization
In 2022, total U.S. goods trade with the UK grew by 20%
(WTO) terms for trade with each other. Yet, the TCA does
from 2021 to $142.4 billion ($77.0 billion in exports, $65.4
not replicate EU single market access, and adds new border
billion in imports). Total U.S. services with trade with the
checks and regulatory requirements. It also does not fully
UK grew by 19% to $155.4 billion ($82.0 billion in exports,
address some issues, including financial services.
$73.5 billion in imports) (see Figure 2). Top U.S. goods
exports included oil and gas; nonferrous metals (excluding
The Ireland/Northern Ireland Protocol of the UK-EU
aluminum), and aerospace products and parts; and top U.S.
Withdrawal Agreement keeps Northern Ireland, unlike the
goods imports included pharmaceuticals and medicines,
rest of the UK, aligned with some EU trade rules to
motor vehicles, and aerospace products and parts. Financial
maintain an open border on the island of Ireland, while
services and various other business services were the top
trying to ensure the integrity of the EU single market.
traded services. (Data from U.S. Bureau of Economic
Implementation of the Protocol has disrupted some trade
Analysis, BEA, and U.S. International Trade Commission.)
between Northern Ireland and the rest of the UK, and raised
tensions within Northern Ireland and between the UK and
By country, the United States and UK are each other’s main
the EU. In February 2023, the UK and EU reached a new
foreign investors. In 2022, U.S. FDI stock in the UK was
agreement, the Windsor Framework, to address some
$1.1 trillion, and UK FDI stock in the United States was
Protocol challenges, including to ease checks on certain
$663.4 billion (on a historical-cost basis). UK non-bank
goods entering Northern Ireland; the UK and EU formally
holding companies and the finance and insurance sector
approved the Framework in March 2023. (See CRS Report
drew the most U.S. FDI, as did the U.S. manufacturing
R46259, Northern Ireland: The Peace Process, Ongoing
sector for UK FDI. U.S. and UK affiliates supported 2.7
Challenges, and U.S. Interests,)
million workers in the two countries in 2020. (BEA data.)
In 2022, more than 7,500 U.S. firms had a UK presence,
The Windsor Framework may reduce some post-Brexit
which can act as a hub for activity in Europe, the Middle
uncertainty and pave the way for the UK and EU to address
East, and Africa.
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U.S.-UK Trade Relations
Figure 2. U.S. Trade and Investment with the UK
Authority (TPA) of its intent to negotiate an FTA with the
UK post-Brexit, and conducted five rounds of negotiations
in 2020. The talks did not yield a final U.S.-UK FTA, but
some sector-specific regulatory cooperation emerged.
The Biden Administration did not revive comprehensive
FTA negotiations with the UK; its trade policy more
generally has focused on targeted executive-led trade
initiatives and dialogues. 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
MOUS on economic and trade cooperation with some U.S.
states (e.g., to support commercial partnerships, research
ties, and low-carbon economies).
Should the United States and UK renew bilateral FTA talks,
some experts are optimistic that the partners could reach a
Source: CRS, with U.S. Bureau of Economic Analysis (BEA) data.
deal, given historical similarities in their trade approaches.
Note: Not adjusted for inflation.
Still, flashpoints could reemerge. Some in industry see an
FTA as a way to enhance market access and regulatory
Executive Trade Actions. The Biden Administration’s
alignment, while some in civil society oppose perceived
engagement with the UK has included efforts to address
efforts to weaken UK food safety and other regulations.
specific trade concerns and pursue various trade initiatives
Other contentious areas may include pharmaceuticals,
and dialogues, in parallel to some U.S.-EU efforts. In 2021,
financial services, e-commerce, and investment.
the United States and UK reached agreements to address
the long-running WTO Boeing-Airbus subsidies dispute,
Selected Issues for Congress
the UK’s digital services taxes, and U.S. “Section 232”
Congress may oversee and seek to shape ongoing executive
steel and aluminum tariffs initially imposed by the Trump
trade initiatives with the UK. In doing so, Congress may
Administration. In some of these areas, they also agreed to
assess whether these initiatives sufficiently advance U.S.
cooperate on related global economic issues of shared
trade priorities with the UK and what role Congress should
concern (e.g., steel oversupply).
play, if any, in the approval of any outcomes of these
initiatives. A focal point may be the U.S.-UK CMA
In 2022, the United States and UK launched bilateral
dialogues on the “Future of Atlantic Trade,” to further
negotiations, which could renew debates over U.S. trade
policy and the role of Congress that have arisen in the U.S.
deepen bilateral trade ties and cooperate to address shared
CMA negotiations that are ongoing with the EU and that
challenges. The dialogues focused on issues concerning
were recently concluded with Japan.
small- and medium-sized enterprises (SMEs), digital trade,
worker rights, supply chains, food security, and climate.
Looking forward, Congress may examine whether to direct
They also revived a dialogue on SMEs, and launched a new
the Administration to pursue FTA negotiations with the UK
dialogue on technology and cross-border data flows.
and/or sector-specific agreement (e.g., on digital trade).
Considerations may include the potential benefits and costs
In June 2023, the United States and UK issued an Atlantic
of further trade liberalization, the status of U.S.-UK efforts
Declaration for a Twenty-First Century U.S.-UK Economic
to resolve bilateral frictions, and the impact of UK FTAs
Partnership. In the Declaration, they announced plans for
with other countries on U.S. firms’ competitiveness. The
coordinated actions in areas such as critical and emerging
UK signed the Comprehensive and Progressive Agreement
technologies, supply chains, digital technology, and clean
for the Trans-Pacific Partnership (CPTPP) in July 2023—
energy. Among other things, they stated their intent to
becoming the first new member to join CPTPP.
immediately begin negotiating a targeted critical minerals
agreement (CMA), to enable five critical minerals for
Some Members support a U.S.-UK FTA, introducing bills
electric vehicles (EVs) that are extracted or processed in the
to authorize comprehensive trade negotiations with the UK
UK to count towards certain EV tax credit requirements of
(e.g., S. 4450, 117th Congress; H.R. 3653/S. 629, 118th
P.L. 117-169, commonly referred to as the Inflation
Congress). Some Members have tied their support of a
Reduction Act of 2022 (IRA). The UK, the EU, and other
U.S.-UK FTA to ensuring that Brexit outcomes do not
U.S. trading partners had raised concerns that some IRA
undermine the Northern Ireland peace process (e.g., S.Res.
provisions could discriminate against foreign firms. The
117, 117th Congress, and S.Res. 157, 118th Congress, both
United States is also negotiating a CMA with the EU and
passed in the Senate). Congressional interest in a U.S. FTA
signed one with Japan in March 2023.
with the UK could factor into debate over potential renewal
Per the Biden Administration’s 2023 trade policy agenda,
of TPA, which expired in 2021. Entry-into-force of any
the partners “will continue to deepen”
final FTA would require congressional approval.
their trade
relationship and address shared concerns related to forced
Congress also may examine how UK trade policy
labor in supply chains and distortive practices by non-
engagement at the U.S. state level relates to U.S. trade
market economies, most notably China.
policy on the UK overall.
Comprehensive FTA Outlook. Brexit opened up the
Shayerah I. Akhtar, Specialist in International Trade and
possibility of a U.S.-UK bilateral FTA. In 2018, the Trump
Finance
Administration notified Congress under Trade Promotion
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U.S.-UK Trade Relations

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