The BCC met with Trade Minister, Chris Bryant, this morning to offer its support for the calm, level-headed response from the Prime Minister to the latest US tariff threat.
BCC Director General, Shevaun Haviland CBE, and Director of International Trade, Steve Lynch MBE, had a previously scheduled meeting with the Minister to discuss a range of trade issues.
But they took the opportunity to talk about the developing threat of fresh US tariffs for UK businesses of 10% at the end of January with an additional 15% in June.
Speaking afterwards Shevaun said:
“Throughout tariff developments, the government has kept a cool head and continued to negotiate. That’s seen us establish a competitive advantage over many other countries in the US market for goods like steel and pharmaceuticals.
“We are still in the foothills when it comes to these new tariff proposals from the President and there is some way to go before we will have final clarity on them.
“But should the worst-case scenario come to pass, then the impact would be significant. A £6bn hit at the end of January, rising to £15bn in June.
“If that happens, orders will drop, prices will rise, and global economic demand will be weaker as a result. That would be a lose-lose situation for everyone.
“The UK is not without influence, our bilateral trade with the US is worth £300bn, we have £500bn invested in its economy and it has £700bn tied up in ours. There is a high-level of co-dependency.
“The government should keep everything on the table during talks. Many firms, especially SMEs, will now be facing difficult decisions and we urge it to consider its contingency plans for support should the worst happen.
“The existing 10% tariff means that many businesses have already negotiated with their US customers on managing the impact and we would suggest they continue this dialogue.
“Last year, enhanced credit and financial support was offered through UK Export Finance and the British Business Bank to cushion the effect of tariffs, and this is another option.”
New Tariff Threat – BCC assessment of the current situation
- The US President has threatened to introduce a new 10% tariff for UK imports into the US from February 1.
- If the issue of Greenland’s future is not resolved to his satisfaction by June 1, he has said he would raise this tariff to 25%.
- No executive order or proclamation has yet been issued by the US government to clarify what legislation would be used to implement these new tariffs.
- It could be as late as January 31 before this will be known.
- If the legislation used is the same as for the existing reciprocal tariffs, it would be the International Emergency Economic Powers Act 1977 – IEEPA.
- If that is the case, then the tariffs would stack upon the existing 10% rate applicable to UK exports subject to reciprocal levies.
- To date, there has not been a case where IEEPA tariffs have been stacked on top of section 232 tariffs (implemented under the US Trade Expansion Act 1962).
- This is the legislation which has been used for steel, aluminium, automotives pharmaceuticals and semiconductors.
- In this scenario, products like steel, pharmaceuticals or semiconductors subject to s232 tariffs could see these remain at present levels or they could be revised in line with Presidential authority over existing s232 tariffs.
- For other product lines already subject to reciprocal tariffs of 10%, such as clothing and whisky, these new proposals will most likely stack on top of the existing tariff.
- This means the IEEPA rate for the UK would become 20% from 1 Feb, and 35% from 1 June.