Some of UK’s key industries could be hit when US president announces sweeping measures on Wednesday
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Donald Trump’s trade war will expand across the globe on Wednesday as his administration prepares to impose a wide set of tariffs on goods imported to the US from overseas.
Dubbed ‘Liberation Day’ by the US president, it seems likely all nations will be included in the sweeping measures – the UK included. This is despite attempts by ministers to secure an exclusive ‘carve-out’ with the Trump administration, something Sir Keir Starmer has admitted has not been agreed upon.
The prime minister said: “The likelihood is there will be tariffs. Nobody welcomes that.
“We are obviously working with the sectors most impacted at pace on that. Nobody wants to see a trade war but I have to act in the national interests,” he told Sky News.
Sir Keir added that “all options remain on the table,” but has not followed other nations in announcing retaliatory tariffs on the the US.
open image in gallery
(Reuters)
The European Union (EU) has already retaliated to the first round of tariffs by imposing its own on 26 billion euros (£22 billion) worth of goods from the US. The bloc says it will deliver a “timely, robust and calibrated” response to the upcoming announcement.
The full extent of the tariffs has not been revealed by the Trump administration, but his team have given a clear indication what to expect. The measures will add to the 25 per cent tariff placed on imports of steel and aluminium to the US on all countries since March.
New global tariffs targeting auto parts used to make cars have now been confirmed after Trump delayed imposing 25 per cent on these goods from its neighbouring nations and China until the start of April.
Hundreds of reciprocal tariffs are also understood to have been drawn up by the Trump administration, which will be different for every country. These will consider factors like existing tariffs, trade balances and VAT for all of the US’s trading partners.
Here’s what president Trump’s tariff plans could mean for the UK:
Steel and aluminium
The 25 per cent tariff on steel and aluminium imports to the US has been in place since the middle of March. In such a short time it’s hard to measure the long-term impact of the decision on the UK. However, economists say it could affect UK products worth hundreds of millions of pounds as things like cars, cans and tin foil are likely to become more expensive.
The UK’s steel industry is already struggling as excess capacity in the global market has pushed prices down. This large-scale production is largely coming from China, which is what is partly motivating Trump to place even higher tariffs on the country’s steel at a massive 45 per cent.
The steel rolling mill at Tata Steel in Port Talbot in south Wales (PA)open image in gallery
The steel rolling mill at Tata Steel in Port Talbot in south Wales (PA) (PA Archive)
Industry figures in the UK have publicly disagreed with the Labour’s decision to not retaliate. Gareth Stace, the director-general of trade association UK Steel, branded the Trump administration’s move “hugely disappointing”, and urged the government to take “decisive action” to protect the industry.
“These tariffs couldn’t come at a worse time for the UK steel industry, as we battle with high energy costs and subdued demand at home, against an oversupplied and increasingly protectionist global landscape”, he said.
The US is the steel industry’s second largest export market behind the European Union.
Auto parts
President Trump has confirmed that a 25 per cent import tax will be introduced on all cars imported to the US, a measure which will be a blow to the UK’s automotive industry.
Some 16.9 per cent of UK car exports were to the US last year, representing a total of more than 101,000 units worth £7.6 billion.
Russ Mould, investment director at AJ Bell, said the tariffs come at "a very difficult time for the industry" as UK car production dropped 12 per cent in February compared to the year before.
He said: "Consumer confidence is on edge, we know it's a highly competitive market, and even electric vehicles aren't perhaps quite selling as quickly as hoped.”
The US is an important export market for Jaguar Land Rover (David Jones/PA)open image in gallery
The US is an important export market for Jaguar Land Rover (David Jones/PA) (PA Archive)
British brand Jaguar Land Rover is set to be particularly hit by the tariffs, as 100 per cent of its cars sold in the US are made abroad. Its famous Defender and Range Rover lines are popular in the US, making the nation its top sales destination worldwide.
The new tariffs will come as a major blow to Labour as it looks to grow the economy, with business secretary Jonathan Reynolds saying it is his “objective” to have the tariffs reversed.
“I can’t give a timescale on that but, of course, the longer we don’t have a potential resolution to that, the more we will have to consider our own position in relation to that,” Mr Reynolds said in a reference to potential retaliatory tariffs.
Reciprocal tariffs
Focusing on what is has called ‘unfairness’ in the US’s international trade agreements, the Trump administration has also promised to impose reciprocal tariffs which will be set at different rates for every partner.
Initially thought to only comprise the country’s largest 10 to 15 trading partners, Trump told reporters at the end of March that this was a “rumour” and that “all countries” would see tariffs placed on them. His comments caused economic uncertainty, with the US stock market seeing its lowest month since December 2022.
How the Trump administration works out how to apply these tariffs in the UK remains to be seen. The UK says it is in a trade surplus with the US, meaning that exports are bigger than imports. Meanwhile, the US says the trade surplus is reversed. The discrepancy is largely due to different methods of measuring services trade.
The US is the largest single-country buyer of UK goods
Though the EU block buys three times more UK goods, the United States is by far the single largest buyer of British exports (£57.3 billion), according to latest data; nearly double that of Germany (£32.2 billion).
The UK's goods exports are at risk from Trump tariff threats.
All figures are in GBP, for the twelve months up to November 2024 (latest data) according to the UK government trade statistics.
Chart: Alicja HagopianSource: Department for Business and Trade
Independent
While the US is the UK’s largest single trading partner, the nation exports for more goods to the European Union as a whole. In the 12 months to November, the UK exported £57 billion to the US and £175 billion to the EU.
However, the Trump administration says its plans will counter trading partners that impose “unfair, discriminatory, or extraterritorial taxes” on the US – “including a value-added tax (VAT).” In the UK, VAT stands at 20 per cent and is charged on most goods and services sold domestically.
Meanwhile, the US does not have a single nationwide VAT rate, instead varying by state and ranging from five to 10 per cent. For this reason, some economists have speculated that the US may seek to impose a reciprocal 20 per cent tariff on the UK which rebalances the final cost of goods sold in the UK and US.
VAT in the UK is charged at a customer level, meaning it generally is not considered to have an impact on international trade prices.