By Brian Swint

Investors have been waiting on tenterhooks for weeks to learn how big President Donald Trump's tariffs will be when they finally take effect. They should get more insight today.

Trump said that a "major trade deal" will be announced at 10 a.m. on Thursday, one that will be the "first of many," in a post on the Truth Social social-media platform on Wednesday. The Wall Street Journal reported it will unveil an agreement with the U.K.

While details of the arrangement are still scarce, they're probably not as important for the stock market as the news on whether and how much it will reduce the 10% tariffs imports from the U.K. would have been subject to under Trump's so-called reciprocal tariff plan. The hope is that it will provide a template for further arrangements that can bring overall levies down to minimal levels before the expiration of the pause on the tariff plan on July 8.

Other countries negotiating with the Trump administration will be able to study the arrangement to decide how much is worth conceding in negotiations. In theory, Britain should get the best deal possible.

For one thing, the U.K. has a trade surplus in goods with the U.S. recently, meaning that it buys more goods from America than it sells -- one of Trump's goals with tariffs is reducing U.S. trade deficits. Furthermore, the U.K. is only the fifth-biggest purchaser of U.S. exports, behind Canada, Mexico, China, and Japan. And the European Union, which represents 20 countries including Germany and France, will be negotiating as a bloc.

There's a risk that the deal may not change much in practice. Britain would like a reduction in the U.S.'s 25% steel and automobile tariffs, but the 10% baseline tax may remain in place, the Journal reported, citing unnamed people familiar with the talks. In return, the U.K. may offer concessions on a digital tax put on big U.S. technology firms, the paper said.

Still, any reprieve would be likely to help U.K. aerospace companies like Rolls-Royce and BAE Systems. Pharmaceutical company AstraZeneca stands to gain, as does spirits maker Diageo, which owns Johnnie Walker whiskey and Tanqueray gin.

But today, the important point is that trade deals to reduce tariffs are possible. Stocks have largely recovered losses since Trump's April 2 "Liberation Day" announcement of widespread taxes on imports, which they then delayed a week later. In the longer term, investor confidence will only be able to grow if this deal is followed up by more, particularly with the biggest U.S. partners.

Tariffs Keep Fed on Hold

Yesterday's press conference following the Federal Reserve interest-rate decision confirmed that tariffs are the greatest unknown for policymakers. Chair Jerome Powell and colleagues kept rates on hold and said they're waiting before making the next move.

For now, the economy is strong enough to give the Fed time. Markets are pricing in an 80% chance for another decision for unchanged rates in June and a 55% chance of a quarter-point cut in July.

Write to Brian Swint at brian.swint@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 08, 2025 05:14 ET (09:14 GMT)

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