Goods exported from the UK to the US will now face tariffs of 10% as part of the so-called "Liberation Day", aimed at protecting US industry from foreign competition. The US administration had already announced global tariffs on steel, aluminium and cars.
What areas are most likely to be affected? As well as the sectors on the BBC's graph, Scotch whisky was affected by US tariffs during Trump's last presidential term, and other food and drink (including chocolate, cheese and salmon) will be affected, as well as chemicals.
The UK government has been focused on growth, and we've written about the steers given to regulators to consider growth when implementing their regulatory responsibilities. However, the imposition of tariffs throws the government's plans into the air, as well as causing upheaval amongst the sectors affected by increasing costs and disrupting supply chains. The Office for Budget Responsibility has said that tariffs will contribute to an "extraordinary degree of uncertainty" about Britain's prospects. GDP could reduce by a significant amount, even though the UK has got off relatively lightly compared with, for example, the EU which has had 20% tariffs imposed.
If other countries impose retaliatory tariffs, the impact on UK GDP could be greater as the global economy is affected – Rachel Reeves spoke to the House of Commons Treasury Select Committee about this on 2 April. For example, the EU is considering its response and whether to retaliate with its own tariffs. As well as the uncertainty caused by a trade war, the position for Northern Ireland becomes even more complicated than it is already. Under the Windsor Framework, Northern Ireland remains part of the UK's customs territory, but has to apply EU customs and other goods-related laws.
The UK government has said that currently it has no plans to impose its own tariffs because it is negotiating a trade deal with the US. However, it also says that it won't rule anything out. It has invited UK companies to give their views on what any future UK response should look like by providing feedback to questions asking them the average value of their US imports, the impact of any possible UK tariffs and how they would adjust to them.
Significantly, there have been suggestions in the media that the US authorities want the UK to remove or reduce the Digital Services Tax and review how the Online Safety Act and Digital Markets, Competition and Consumers Act are implemented as part of a trade deal. The UK government has denied that it has given ground on this, but it will certainly be interesting to see how this pans out, especially in the context of the government wanting more pragmatic regulation.
The tariffs are due to come into effect from 5 April.
We have published an insight article about the effect of tariffs on video games here.
We plan to publish more sector-specific analysis and guidance, but in the meantime, you might find our From A to B via the four Cs series useful, especially the article on dealing with customs issues.
