This is how Keir Starmer can make the most of US tariffs

3 April 2025, 14:30

The UK government may feel that it has been vindicated in its approach to trade and tariff negotiations with the US with the implementation of the baseline 10% tariff rate upon the UK.

Additionally, ardent Brexit supporters may be emboldened and point to our departure from the EU as a key moment in why the UK avoided the higher 20% rate imposed upon the EU.

We have escaped more punitive reciprocal tariffs by virtue of our relatively balanced trading position and the low reciprocal rates of our tariffs charged on US imported goods. So how do we take advantage of that position?

However, as these tarriff changes revolve around the ‘origin of goods’ and not their ‘place of departure’, UK businesses who import goods from China, the EU and further afield and then send them onto the US, will see their still competitiveness decrease compared to UK exporters who manufacture and source their goods wholly in the UK or from UK raw materials.

Those businesses dealing in goods whose ‘origin’ remains as the initial country of manufacture (such as China)’ but are simply sold onwards after being imported into the UK will find their goods attracting the higher rate duties applicable to those original countries of origin.

Hence, a UK business could find the goods they bought from China and did not substantially transform to subsequently meet UK origin rules, being charged with the applicable Chinese origin duty rate of 54%, not 10%, on arrival in the US. Therefore, the impact on businesses whose supply chains are long, integrated and extended - as global supply chains are these days - will find themselves at a huge disadvantage.

Additionally, the blanket tariffs on cars of 25% create a fundamental issue for the UK, as the automotive industry is the largest sector in terms of value for goods exported, accounting for over £32 billion last year.

This will almost certainly harm the UK’s economic prosperity. Prime Minister Starmer may want to build on his small win with President Trump and seek to reduce that 25% US tariff by matching the former US duty rate on cars of 2.5% - a drop from our existing 10%. This would still generate a degree of revenue for the UK, but importantly, may help mitigate the huge 25% rate from last night which makes UK origin cars less competitive to US consumers.

The UK would have to reduce its duty rate on cars for exporters from around the world under WTO’s ‘most favoured nation’ (MFN) rules unless it holds a trade agreement. However, given the value of the UK’s automotive export market, it may be a change to consider seriously.

Further, the UK forging its own trade path with the US and not stopping to keep its trading relations with the EU on a ‘warm footing’ may see the EU reluctant to ‘reset relations’ over food and agricultural imports and exports to rid the UK-EU market of overburdensome bureaucracy and administration. Something that UK food and agricultural exporters and importers so desperately want.

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Simon Sutcliffe is Customs and International Trade Partner at Blick Rothenberg.

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