US President Donald Trump has announced new import taxes on goods entering America, raising alarms among British manufacturers and consumers. Beginning this Thursday, the federal government will hit cars with a 25% tariff. On top of this, a 10% tariff will now be imposed on nearly all other goods imported from the UK. Experts have cautioned that these tariffs could have a disastrous effect on the UK economy. They would further damage Britain’s bilateral relationship with the United States.
The Institute for Public Policy Research has addressed a growing fear. Manufacturers such as Jaguar Land Rover, and even the Mini production facility in Cowley, Oxford, have significant exposure to these tariffs. And with one in eight UK-built cars exported to the US, the automotive sector stands to suffer the worst consequences. Commercial analysts have claimed that additional tariffs might threaten more than 25,000 positions within the UK car manufacturing sector. The effect on workers would be nothing short of catastrophic.
The conundrum creates a tough choice for UK consumers, as it is unclear how soon or by how much prices will rise. Increasing import taxes per good imported will almost certainly translate to higher prices on goods in the UK market. Ahmed Ihsan Kaya, the NIESR’s principal economist, honed in on perhaps the greatest concern. Then workers will turn around and start making inflationary wage demands, creating a whole other layer of economic turmoil.
The pharmaceutical industry, which is quite dependent on trade with the US, would be at risk. For example, raw ingredients for many life-saving medicines and vaccines often hop between the UK, the EU and the US. Experts worry that higher costs associated with tariffs may disrupt supply chains and lead to higher prices for essential medications.
Clarissa Hahn, an economist at Oxford Economics, emphasized that the initial impact of these price rises will fall on US consumers. American companies bringing goods into the US will pay the price of the tariffs. They would automatically pass these new costs on to their consumers. Swati Dhingra, an economist and member of the Bank of England’s monetary policy committee, stated, “Tariffs of the proposed magnitude are likely to prompt firms that export to the US to lower their prices to retain demand for their products.”
The governor of the Bank of England, Andrew Bailey, has recently attempted to reassure worried citizens about inflation during this shift. He stated that it is the Bank’s duty “to make sure that inflation stays low and stable.” With tariffs sure to raise prices in sectors well beyond steel and aluminum, keeping costs under control could become a greater challenge.
British firms selling goods across the Atlantic are about to find themselves on the front line of these additional measures. By going forward with these tariffs, you will be adding even more pressure on all businesses. They are barely reeling from the shocks of Brexit and the continuing global pandemic. Increased production costs would make these companies less competitive in the increasingly important US market, further depressing their exports.
The future of these tariffs remains uncertain, leading many to question their long-term effects on either economy. While the US government aims to protect domestic industries through these measures, analysts caution that it may come at a significant cost to international trade relationships and economic stability.