by John Alty: senior trade adviser to Pagefield
Donald Trump has announced his planned tariff increases on “Liberation” Wednesday. UK exports will face 10% tariffs, apart from the vehicle and steel/aluminium sectors which face 25% hikes. More widely, countries around the world will be hit with tariffs ranging up to 50%, with the EU attracting a 20% tariff and China an additional 30%. What does that mean for MTA members and the wider UK economy?
The bad news is that it obviously makes exporting to the US more challenging, even if the UK is not hit as badly as others. You will know what your own exposure is as a company, but at a general level, the principal UK goods exports to the US are cars, pharmaceuticals, power generation equipment, scientific instruments and aircraft, accounting for some £25bn of exports over the last year. I can imagine that MTA members will take a significant share of that. Overall goods exports to the US are around £60bn a year.
In my view more seriously, the tariffs on countries across the world will disrupt global trading patterns and could lead to a damaging set of trade wars.
The UK Government has said it won’t retaliate, at least at this stage, and is still hoping to negotiate a trade deal, which could eliminate or mitigate these tariffs. Meanwhile other trading partners like the EU and Canada have threatened retaliatory action. This won’t directly affect UK exports but the UK will get caught in the crossfire.
What options do businesses have to mitigate these tariffs themselves ? If you are an essential supplier, at least in the short term, to US businesses, it may be possible at least to share the impact of any tariffs with your customers. If you have operations in the US you will want to consider the options for increasing domestic US supply.
If tariffs are here for the longer term – still a bit of an unknown – then looking to widen your customer base makes sense, possibly taking advantage of some of the UK’s existing trade deals with countries like Japan, Korea and other Asian Pacific markets; and potential deals such as that with the Middle East countries in the Gulf Cooperation Council. Negotiations with the EU are due to begin shortly, which in due course could reduce barriers there further.
At Pagefield we can help you think through your options as a sector or as individual companies. Whether you need a review of recent engagements or a tailored plan to meet your strategic goals, find out more about how we can help here.