Shares of British defense companies edged higher on Monday as a new trade pact between the U.K. and the United States officially went into force, offering a boost to industries expected to benefit from improved market access and reduced tariffs.
Among the top gainers, Rolls-Royce Holdings PLC (LSE:RR.) rose 2.2% as of 09:08 GMT, while Chemring Group PLC (LSE:CHG) gained 1.5%, and Qinetiq Group PLC (LSE:QQ.) advanced 2%. BAE Systems PLC (LSE:BAES) also traded up by approximately 1%.
These moves build on prior gains made after the initial announcement of the agreement. Meanwhile, the broader FTSE 100 index was slightly lower, down 0.2% at the time of reporting.
The newly implemented U.K.-U.S. trade agreement introduces a preferential tariff structure, most notably cutting U.S. import duties on British-built automobiles. Under the deal, the first 100,000 U.K.-made cars exported to the U.S. each year will face a 10% tariff, significantly down from the previous 27.5%. Any units beyond that threshold will be subject to a 25% rate.
In a press release on Monday, the U.K. Department for Business and Trade noted: “The U.K. is the only country to have secured this agreement with the U.S., reducing car export tariffs from 27.5% to 10%, saving manufacturers hundreds of millions annually and safeguarding hundreds of thousands of jobs.”
This trade accord is the first signed with the U.S. since President Donald Trump launched a strategy of reciprocal tariffs in April. The final terms were settled in May. The U.S. currently maintains a trade surplus in goods with the U.K., but automobiles remain Britain’s largest export to the U.S., making up 27.4% of all British vehicle exports in the past year.
In addition to automotive benefits, the agreement also eliminates duties on aerospace products, providing support to one of the U.K.’s most prominent manufacturing sectors. However, some uncertainty remains regarding the treatment of British metal exports, which are not yet fully clarified under the new trade framework.
As the deal takes effect, investors appear optimistic that defense and industrial exporters like RR., CHG, QQ., and BAES could capitalize on improved trade conditions and enhanced global competitiveness.
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