(2 April), US President Donald Trump announced a swathe of sweeping trade tariffs on imported goods into the US. While the UK has only been hit by a ten per cent tariff (much lower than some other nations), the action is still expected to cost billions in lost growth.
With the aim of boosting the US economy and protecting manufacturing jobs across the pond, the tariffs are expected to send shock waves around the world, with China (one of the countries hardest hit) already planning retaliation.
The President has set a ten per cent baseline tariff on all imported goods, coming into effect on 5 April, and a number of countries including the UK, will only face that base rate. However, a number of other nations and regions, including the European Union (20%), Japan (24%) and China (a whopping 54%) will face their own customised rate.
In addition, and as expected, the President also confirmed the beginning of a new American “25% tariff on all foreign made-automobiles”. This tariff went into effect almost immediately, at midnight local time, and could spell bad news for the UK automotive sector.
Mike Hawes, Chief of the Society of Motor Manufacturers & Traders (SMMT) said: “The announced imposition of a ten per cent tariff on all UK products exported to the US, while less than other major economies, is another deeply disappointing and potentially damaging measure. Our cars were already set to attract a punitive 25% tariff overnight and other automotive products are now set to be impacted immediately. While we hope a deal between the UK and US can still be negotiated, this is yet another challenge to a sector already facing multiple headwinds.
“These tariff costs cannot be absorbed by manufacturers, thus hitting US consumers who may face additional costs and a reduced choice of iconic British brands, while UK producers may have to review output in the face of constrained demand. Trade discussions must continue at pace, therefore, and we urge all parties to continue to negotiate and deliver solutions which support jobs, consumer demand and economic growth across both sides of the Atlantic.”
Adrian Chell, Plant Director at ZF Chassis Modules (Solihull) added: “The tariffs don’t impact us directly in terms of sales, as we don’t export anything to the US. But our customer does.
“Over 30% of premium cars made in the UK are exported to the US, so this could have a huge impact if car buyers change their behaviour as a result of these tariffs. The supply base are waiting to see what customer’s mitigation plans are – we currently don’t know.
“Cars made by Jaguar Land Rover are luxury products, and even though the price has gone up, some customers will continue to purchase them. Clearly, car manufacturers are not going to reduce their margins to offset the cost of these tariffs. The full impact won’t be realised for another few weeks, until these businesses make an announcement about how they’re going to mitigate this. But in a nutshell, this has the potential to be massively harmful if that demand signal just turns off as a result of this news.”
UK Steel, the trade association for the UK steel industry, and another sector that will feel the pinch of the President’s plans, has urged the government to continue to seek exemptions from these tariffs through an economic deal with the US, and take swift action to strengthen trade defences and support domestic demand and supply chains. Although not impacted by yesterday’s announcement, the sector was already hit with a crippling 25% tariff on 12 March.
UK Steel Director General, Gareth Stace, said: “The UK government must continue its efforts to strike a deal with the US, but we recognise that this requires willingness from both sides. Domestic trade policy on the other hand is entirely within the government’s gift and it can immediately take action to strengthen our trade defences.
“We cannot afford to wait any longer as our exports are being damaged, and our market is being undercut by rising imports. UK Steel has warned that the steel crisis has been deepening for some time and bold, decisive and significant interventions are needed now.”
However, not everyone is convinced that there will be a net negative impact on the steel industry as a result of the new tariffs. “Although the tariff raises immediate concerns of reduced demand and price pressures for many steelmakers, certain specialist producers – those focused on high-grade, niche steel products – will be better equipped to weather the storm,” said Emma Parkinson, CEO of International Energy Products, a specialised steel stockholding firm.
Parkinson is confident that the UK’s pedigree in steelmaking will ensure it is better insulated to attract interest in a more competitive and challenging market. “Areas such as Sheffield have a longstanding reputation for manufacturing advanced steel products, which is a significant advantage on the global stage.”
Responding to the President’s announcement, Prime Minister Sir Keir Starmer commented: “Last night the President of the US acted for his country, and that is his mandate. Today, I will act in Britain’s interests with mine. Decisions we take in coming days and weeks will be guided only by our national interest, in the interests of our economy, in the interests of businesses around this table, in the interests of putting money in the pockets of working people.”
The Manufacturer Editor Joe Bush commented: “The President’s announcement, while expected, is another blow for UK manufacturers, particularly those in key areas such as steel and automotive. The sector has had to navigate a multitude of challenges in recent years, some of which are still being managed on a daily basis, so this must seem like yet another plate to spin.
“This brings the need for a clear, consistent and concise Industrial Strategy into even sharper focus. In the Chancellor’s recent Spring Statement, there wasn’t an awful lot for manufacturers to hang their hats on, however, for some businesses and industries, navigating this latest setback will be impossible without assistance from the highest level, so I urge our leaders to step up.
“That being said, the response from the sector, in the face of the various curve balls of recent years, has shown just how resilient, agile and adaptable the UK manufacturing sector is, and although this may feel like yet another smack in the face, I fully expect manufacturing to once again, come out swinging.”
It should be said that it’s not all doom and gloom, and John Pearce, CEO of Made in Britain, has stated that these new tariff introductions won’t actually reduce the attractiveness of British made products.
He commented: “Though the new ‘all territories’ tariffs that affect British-made goods are far from desirable, they don’t in themselves make our goods less attractive. Companies that export to the US will no doubt be concerned with such a broad and aggressive change but they will work tirelessly to reduce the inflationary impact on consumers and buyers in the US. However, they cannot absorb this increase in import duty by themselves.
“It’s also important to put this into context: 70% of Made in Britain’s 2,150 members export to multiple regions, not just the US. It’s still true that consumers and trade buyers around the world are in love with British-made goods and our innovative approach to product design and manufacturing, and these tariffs won’t change that.
“With so many other factors driving up costs and prices, the last thing any economy needs is more fuel flung into the inflation fire. The tariff measures and negotiations that will follow do nothing to make our products more accessible overseas and do everything to disrupt what was a friendly and vital trading relationship with a key partner.
“Let’s not ignore the elephant in the room: these levies will unfairly and disproportionately affect SMEs – which make up 90% of Made in Britain’s growing membership. So this is, of course, an acute concern and something we will monitor very closely.
“The UK’s imposition of a ten per cent tariff on exports to the US, alongside a 25% tariff on the automotive supply again, is a damaging setback for the sector and an unwelcome weight thrown onto economic growth – especially considering the recent OBR revisions to growth having halved to one per cent, as revealed in the Spring Statement.
“Over 2,000 Made in Britain members making goods for export growth will be hoping that discussions in the coming months succeed in achieving a better trading relationship going forward with the US, one that boosts British makers and puts manufacturing success first and foremost. Until then, manufacturers will have to adapt around the new US tariffs or look to other regions for export growth.”