British businesses have lost their comparative advantage over the European Union after Donald Trump’s latest wave of trade tariffs, experts have warned, despite the overall tariff for UK goods remaining the same. The US president announced plans on Thursday to hit 60 trading partners – including the UK, China and the EU – with renewed tariffs of 10% to 12.5% on all goods, covering 99.4% of American imports. The new levies, which replace an identical temporary duty expiring on Friday, are based on claims that key economic partners have failed to properly tackle forced labour.
But US trade expert Caroline Freund, dean of the UC San Diego School of Global Policy and Strategy, told the BBC’s Today programme the move is “not about forced labour” and that Trump is simply “looking for a legal reason to put the tariffs in”. The US Supreme Court had ruled earlier this year that many of the tariffs imposed globally under emergency powers were illegally enacted. Now, using the allegation of forced labour, Trump hopes the new tariffs will be less open to challenge in the courts, as Channel 4 News reported.
“New US tariffs on 60 countries leave UK with no edge over EU, despite same 10% rate.”
While Britain and the EU both face a 10% tariff, the bloc has been handed preferable terms thanks to differences between the two deals negotiated with Trump. The Turnberry deal, agreed between the EU and President Trump last year, meant no tariffs could be added to the previous 15% blanket levy. Now that the EU’s tariff has been reduced to 10%, it gives the bloc an edge over the UK for sectors not given specific carveouts in the deal Sir Keir Starmer agreed with the US last year, such as clothing, chemicals, beverages or bikes.
The head of the British Chambers of Commerce (BCC), William Bain, told the BBC: “There will be some concerns in the business community this morning about what the UK needs to do to get the same treatment the European Union has got here.” There was some good news for Britain, with a deal removing any tariffs on Scotch whisky announced on Friday, but critics have warned that Britain’s exit from the EU has left it exposed when it comes to trade. Joe Meighan, policy adviser for the European Movement UK, said: “The UK’s much-vaunted tariff advantage over the European Union has evaporated overnight. It is a timely reminder that chasing preferential treatment from individual trading partners, particularly the US, is no substitute for being part of the world’s largest integrated market.”
The new tariffs are likely to raise costs for businesses and consumers, although the impact could be softened due to the number of exempted goods, said Wendy Cutler, economic security expert at the Asia Society Policy Institute. Most trading partners would be disappointed with the new levies and were likely to focus on ways to “reduce their dependence on the US” by making deals with other countries, she added.