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In the last 24 hours President Trump has announced tariffs which will cost billions to the world economy. Brexiteers are claiming it is a success for the UK to be only facing tariffs of 10%, in comparison to the 20% in Europe.
Here is what you need to know about the reality of tariffs and how this affects our future relationship with Europe:
- The OBR said last week that a global trade war involving 20% tariffs could wipe out the fiscal headroom preserved in the Spring Statement and reduce UK GDP by 1%
- Despite the UK facing a lower US tariff rate than the EU, the Chancellor told the Treasury Select Committee on Wednesday "specific tariffs on the UK are less relevant to the growth and inflation impacts than the global picture, because we are an open trading economy…Even if we are able to secure an economic agreement with the US… that doesn’t mean that somehow we are therefore out of the woods and not impacted by tariffs”
- UK total trade with the United States is close to £300bn per year. UK trade with the US in goods is balanced, meaning the UK imports as much in goods from the US as it exports. But despite the lack of a US trade deficit, and despite Brexit, speculation that the UK would escape this round of tariffs turned out to be false.
- The impact of US tariffs on the UK car industry, which now faces sector-specific US tariffs of 25%, could be particularly severe. The think tank IPPR notes that 1 in 8 UK-built cars is exported to the US, and that 25,000 jobs in the UK car industry could be at risk
- Press reports suggest the government has offered to scrap or scale back its digital services tax, and cut tariffs on fish and seafood, as part of the economic deal it is negotiating with the US
- The EU is the UK’s biggest trading partner. The UK exported £185bn of goods to the EU in 2023, and imported £319bn of goods.
- Brexit has meant the UK has erected trade barriers to the EU. In imposing sweeping global tariffs, the Trump administration undermines the logic of Brexit proponents that these barriers were worth erecting in order to strike trade deals elsewhere around the world
- Brexit means we have less influence on the global response to Trump’s tariffs. The EU can use its economic weight to try to change the President’s approach, with a EU-US trade volume of €1.6 trillion – more than four times the UK’s volume with the US.
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