Businesses Left Considering their Options with New U.S. Tariffs

At 21:00 (BST) yesterday President Trump was standing in the Rose Garden announcing sweeping tariffs impacting every corner of the globe, regardless of whether you’re deemed one of the country's allies, competitors or adversaries.  

It can be argued that the UK experienced a smaller impact compared to other nations with the introduction of a reciprocal 10% tariff rate (classed as the base-rate and minimum), compared to 20% impacting the EU and South Korea for example.  

At the higher end of the scale, China is the only country that will see stacking of the new tariff measures.  For example, steel of Chinese origin will now be subjected to a total of 59% tariff rate (new 34% tariff rate added on top of the 25% that was already in place). 

Are these new tariffs additional to the current standard rate? 

As per the Department for Business & Trade: 

“The U.S. has announced that it will impose an additional 10% tariff on top of existing U.S. duties, fees and taxes on imports from the UK.” 

Which goods are impacted? 

In short, the vast majority. The new announcement does not impact steel, aluminium or derivatives from these product as there is already a new global tariff rate in place.  Equally, automotives saw a new 25% tariff rate come into effect today while the automotive supply chain is also been dealt with separately.   

Other sectors not covered by this announcement include pharmaceuticals, energy, critical minerals, semi-conductors, lumber and copper.  

How did we get to the 10% for UK goods? 

President Trumps ‘formula’ is something that is already coming under scrutiny.  It has been described on the website for the Office of the United States Trade Representative with an accompanying equation that would scare anyone without a degree in maths.  However, put simply, the idea was that “reciprocal tariffs are calculated as the tariff rate necessary to balance bilateral trade deficits between the U.S. and each of our trading partners”. 

However, whether it has equally done that for each trading partner is something that is already up for debate.  For example, the U.S. currently has no trade deficit with the UK however the UK has been hit with 10%.  Also, as explained by William Bain, Head of Trade Policy at the British Chamber of Commerce, the UK’s average Most Favoured Nation rate is 1.25% which is in comparison to Brazil's rate which is 13%.  However, both countries have been handed 10% tariff increase.  

When describing the formula, the Vice-President of the Beijing-based Centre for China and Globalisation told the BBC that: 

“The mathematics are completely wrong.  It’s very shoddy.  It’s not subject to scrutiny by any standard”. 

When will the new tariffs take effect? 

The turn-around period for businesses is short, with each country being subjected to at least a 10% tariff rise from April 5th at 00:01 EDT. 

Those countries which have been subjected to a tariff that is greater than the baseline of 10% will be subject to the higher tariff rate from April 9th at 00:01 EDT.  

How long will the tariffs stay in effect? 

At the moment the official word is that they will “remain in effect until such a time as President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved or mitigated”.  

Essentially meaning for as long as President Trump likes. 

What has been the global response? 

For most countries and trade blocs, the response has been to hand out their own reciprocal tariffs on U.S. goods.   

For example, President of the European Commission Von Der Leyen said: 

“We are already finalising a first package of countermeasures in response to tariffs on steel.  And we are now preparing for further countermeasures, to protect our interest and our businesses if negotiations fail...As Europeans we will always promote and defend our interests and values.” 

Whereas in the UK, though not ruling out any particular action, Prime Minister Kier Starmer has expressed the need for a “cool head” and that “nobody wins in a trade war, that is not in our national interest”.  

Part of the UK’s plan seems to be to quickly agree upon the new economic prosperity deal with talks remaining ongoing.  It is hoped that in reaching an agreement the UK can remove itself from Trump’s measures and in turn avoid having to take any retaliatory action of their own.   

If your business is impacted by these changes, the Tees Global team of international trade specialists is here to help.  Contact us today for advice, support, or training on finding alternative solutions to keep your exports competitive in a shifting trade environment.