Donald Trump’s latest round of tariffs has put UK businesses at a disadvantage against the EU even though the overall tariff for London has not changed, experts have said. The levies, announced late on Thursday and said to be aimed against countries that engage in forced labour, reduce the EU’s previous 15% near blanket tariff to 10%, the same level as the tariff deal struck by Keir Starmer and Peter Mandelson last year.
What did the UK say about the new tariffs?
The UK welcomed the deal, announced by the US trade representative, Jamieson Greer, and said there was “no change” to the headline 10% tariff or preferential rates in the car, pharmaceutical and aerospace sectors concluded in the UK’s economic prosperity deal (EPD). The new measures for the EU will replace the tariff in the Turnberry deal concluded at the US president’s Scottish golf course last year.
An EU spokesperson said the deal “establishes an all-inclusive tariff rate of 10% for the EU, and reintroduces the additional tariff exemptions for the EU, such as cork and diamonds, on top of those on aircrafts and parts, generic medicines, and active ingredients”. The Turnberry deal meant no tariffs could be added to the 15% blanket levy. The reduction to 10% effectively puts the EU at an advantage for sectors not specified in Starmer’s deal, such as bikes, clothing, chemicals, beverages or gifts.
Which industries benefit or lose out?
However, in a fillip for Andy Burnham, a deal cutting tariffs on Scottish whisky to zero is expected to be announced later on Friday, giving the UK an advantage over Irish and French spirits rivals, which attract a 10% duty.
William Bain, trade policy director for the British Chambers of Commerce, welcomed the fact that there was no change on the headline 10% rate for the UK but said some sectors, such as clothing, have lost their comparative advantage against the EU.
A British knitted jumper, for example, which attracted a 12.5% tariff, would be imported with an additional EPD tariff of 10%, bringing total levies to 22.5%. An EU jumper could now be sold into the US at an all inclusive rate of 10%.
“Clearly there is a difference between how the UK has been treated today and how the EU has been treated today. And that is undeniable,”
Bain said.
“Negotiations have to go on between the UK and the US over this. At the chambers network we want to see a path to lower tariffs,”
he added.
How have unions and government responded?
The GMB trade union said the new tariffs were “ill-judged, potentially catastrophic for business and likely to utterly fail in their stated aim”. Charlotte Brumpton-Childs, GMB national secretary, said:
“The EU now has a better trading relationship with the US than we do – which undermines the so-called ‘special relationship’.”
A government spokesperson said:
“There is no negative change to the tariff rate facing UK businesses as a result of this announcement. Our agreement with the US remains in place, and today we see an improvement to our trading terms with zero tariffs on whisky and medical technology.
“We take forced labour very seriously to ensure that in global supply chains UK businesses are not complicit. The US has recognised the steps the UK is taking, which is why there are no additional tariffs for the UK under this announcement.”
An EU spokesperson said:
“We did not agree with the premise of this investigation on forced labour. And we had communicated this, also to our US counterparts.”
What happens next?
Trump is expected to announce more tariffs under section 301 of the 1974 Trade Act. With hints of retaliation over the EU’s decision to impose a €890m (£760m) fine on and a threat to impose 100% tariffs on pharma, this would hit Ireland, Germany and Belgium hard.
Key Facts
- Donald Trump announced a new round of tariffs late on Thursday.
- The EU’s previous 15% near blanket tariff was reduced to 10%.
- The UK said there was no change to its headline 10% tariff under the EPD.
- Scottish whisky tariffs are expected to fall to zero later on Friday.
- Trump is expected to announce more tariffs under section 301 of the 1974 Trade Act.
