Donald Trump’s decision to introduce a lower 10% tariff rather than the feared 15% will provide some relief to British exporters, but will not lift the uncertainty, says the British Chambers of Commerce.
It had warned that the higher rate would add up to £3 billion on British exports, putting more sales to the US at risk.
However, a late change of plan means the new 10% US tariff arrangements under section 122 of the Trade Act 1974 came into effect at 5am for the next 150 days.
These affect goods leaving UK ports bound for the US, which are not covered by the UK’s Economic Prosperity Deal.
A rate of 10% will apply on top of the US’ most favoured nation duties for individual products. The uplift to 15% as announced on Saturday has yet to be implemented by President Trump, but the risk of this tariff still remains and could be introduced at any time. This would add a further 5% hike in duties for applicable UK goods if it is applied.
The new 10% tariffs expire on 24 July unless renewed by an Act of Congress.
William Bain, head of trade policy at the BCC, said: “While a new 10% tariff rate, instead of the threatened 15%, will provide some relief it shows how difficult it is for businesses to plan ahead.
“It is far from clear what will happen next, and whether a higher tariff rate is still on the way. Despite the immediate reprieve, there is fresh uncertainty for UK firms exporting goods to the US.
“This makes it very difficult for firms to understand the prices and margins they will be able to secure for their goods, currently under production, for export in several months’ time. Inevitably this will have an impact on their sales and hit the economy.”
The BCC has put a six-point plan to Government to guard against risks to UK exporters of the new tariff system and to support firms should the uplift to 15% US tariffs be implemented soon.
New research by the BCC’s Insights Unit found that:
- A quarter of exporters said a general export cost increase of 10-15% would put more than half of their overseas sales at risk.
- 80% of exporters currently feel exposed to geopolitical risks.
- One in eight exporters were already exploring strategic shifts to reduce exposure to US tariff uncertainty.
The BCC has written to government to set out six steps it can take to help ease the cost burden on firms. It believes that the nature of the legislation being used by the US President means an exemption for the UK from the new tariff rate is unlikely. But there are a range of other tactical options available.
Mr Bain said: “British businesses exporting to the US have been on a non-stop rollercoaster ride for almost a year and their patience is wearing thin.
“The constant shifting sands on tariffs have worn them down and it is no surprise that so many are now considering a change in emphasis to other markets.
“That’s a sensible move, but the US remains our single biggest trading partner and to disengage it with entirely would be a mistake. Last year it accounted for £60bn worth of UK sales.
“It is very difficult to predict what the next twists and turns in this saga will be, but we believe there are several steps the government could take to stabilise the situation.
“Getting on the front foot is crucial, not only to ease the immediate pain but to show businesses that the government is pulling out all the stops to limit the damage being caused.”
The BCC’s full six-point plan:
- Carry out co-ordinated diplomacy with key international partners to encourage the US Administration to lower the 15% tariffs as soon as possible. Meet with the US Administration and Congressional decision-makers alongside impacted UK businesses.
- Implement the Economic Prosperity Deal and Technology Prosperity Deal in full.
- Raise the capacity of UK Export Finance from £80bn to £100bn, to support exporters as they deal with increased cost pressures.
- Increase facilities and loans from the British Business Bank to support firms facing unexpected increases in costs and strain on cashflow.
- Review the UK Global Tariff (UKGT) to see what further support can be provided to UK manufacturers on import and component costs.
- Boost export support to allow firms to explore other international markets; including the FCDO-BCC Diplomatic Advisory Hub and BCC Trade Accelerator programme.
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