The European Union has announced plans to impose tariffs on select American goods, including Bourbon whiskey, jeans, and Harley-Davidson motorcycles. This move comes as a response to the United States' decision to apply tariffs on steel and aluminium imports from the UK, with rates set at 25% for steel and 10% for aluminium. These trade tensions have raised concerns about reciprocal measures and their potential impact on international commerce.
The United Kingdom is acutely aware of the potential repercussions. The imposition of such tariffs by the US on UK exports could lead to significant financial implications. In 2024, the UK exported around £470 million worth of raw steel and aluminium to the US. With a 20% standard VAT rate in place, there is a possibility of the UK facing considerable reciprocal tariffs from the US. The total annual value of UK exports affected by these US tariffs is estimated at approximately £2.7 billion.
In 2023, the US maintained an average external tariff of 3.3%, a figure that underscored its competitive trade stance. The Trump administration's new tariffs, however, target not only raw materials but also products manufactured with steel and aluminium. These include a wide range of goods, from gym equipment to furniture and machinery. This comprehensive list broadens the scope of affected industries, complicating trade dynamics further.
Amidst these developments, the UK remains hopeful of securing a free trade deal with the Trump administration. Such an agreement could potentially eliminate these tariffs and facilitate smoother trade relations. However, President Trump has issued warnings of reciprocal tariffs on all trading partners of the United States, including the UK, which could take effect as soon as next month.
The US government perceives VAT as a discriminatory tax against its imports, despite its equal application to both imported and domestically-produced goods. This perception adds another layer of complexity to the ongoing trade negotiations between the UK and the US.
The significance of these tariffs becomes apparent when considering the broader picture of UK-US trade relations. In 2024, the UK exported approximately £58 billion worth of goods to the US annually. The goods impacted by these new tariffs represent just under 5% of this total export value. While this percentage may seem small, it highlights critical sectors susceptible to economic disruption.
Simultaneously, the European Union has confirmed its intention to impose tariffs on €26 billion (£22 billion) worth of American imports annually. This decision reflects a broader strategy by the EU to counteract the US's aggressive tariff policies.
President Trump justifies these import taxes with a variety of reasons, including restoring fairness to America's trading relationships worldwide. He also aims to exert pressure on other nations to amend certain policies viewed as unfavorable by the US administration. The newly established US tariffs parallel those that other countries have imposed on American imports, signaling an attempt to level the playing field.