U.K. defense stocks gain as U.K.-U.S. trade deal takes effect

Investing.com -- Stocks seen benefiting from the U.K.-U.S. trade deal, which came into effect this morning, are trading modestly higher after already posting strong gains following the initial announcement.

Defense names are leading the move, with Rolls-Royce (OTC:RYCEY) Holdings PLC (LON:RR) rising 2.2% as of 09:08 GMT, Chemring Group PLC (LON:CHG) adding 1.5%, and Qinetiq Group (LON:QQ) climbing 2%. BAE Systems PLC (LON:BAES) also rose around 1%. 

The broader FTSE 100 was down 0.2% at the time of writing. 

The U.K.-U.S. trade agreement came into effect Monday, introducing a preferential tariff structure for British car exports to the U.S., though uncertainty remains around the final treatment of U.K. metal shipments.

Britain became the first country to strike a trade pact with the U.S. since President Donald Trump announced his reciprocal tariff strategy in April. The terms of the deal were finalized in May.

Under the deal, U.K. goods entering the U.S. will now face a standard 10% tariff. For automobiles, the first 100,000 units exported from the U.K. each year will be subject to that 10% rate, while any additional shipments will incur a 25% duty.

“The U.K. is the only country to have secured this deal with the U.S., reducing car export tariffs from 27.5% to 10%, saving manufacturers hundreds of millions each year and protecting hundreds of thousands of jobs,” the U.K. Department of Business and Trade said in a Monday press release.

The agreement marks a significant reduction from the 50% tariff imposed on car imports from countries outside the deal. The U.S. currently runs a goods trade surplus with Britain, while cars remain the U.K.’s top export to the American market—accounting for 27.4% of all British vehicle exports last year.

The pact also eliminates tariffs on aerospace products, providing further relief to one of Britain’s major manufacturing sectors.