Dear Member,

The WEU has explored in more depth what impact a global Tariff dispute could have on the UK.

To fully appreciate the rapidly changing economic situations the WEU has gone through a number of different news outlets to examine different perspectives on Tariffs.

Below is an attempt to help our members understand what is happening with Tariffs.

Firstly, we have explained Tariffs, then the impact on the US and global economies/ relationships and then finally on the UK.

Understanding Tariffs and the Impact of Trump’s Trade Policies

(How do Tariffs effect the UK, America, the international community)

What Are Tariffs?

Tariffs are taxes or duties imposed by a government on imported goods. They serve as a tool to increase the cost of foreign products, often to protect domestic industries or generate government revenue.

Why Do Governments Use Tariffs?

Protectionism – Tariffs make imported goods more expensive, encouraging consumers to buy locally made products and supporting domestic industries.
Revenue Generation – Governments collect tariffs as a source of income to fund public programs and initiatives.

How Do Tariffs Work?

When businesses import goods, they must pay a tariff to the government. This additional cost is often passed on to consumers, making imported products more expensive and domestic alternatives more competitive.

Types of Tariffs

Customs Duties – Standard tariffs applied to most imported goods.
Anti-Dumping Tariffs – Prevent foreign companies from selling products below production costs to undercut domestic industries.
Anti-Subsidy Tariffs – Counteract unfair advantages given to foreign companies through government subsidies.
Safeguard Tariffs – Temporary measures to protect local industries from harm due to a sudden surge in imports.

While tariffs help balance trade, protect jobs, and support economic stability, they can also lead to higher consumer prices and trade disputes.

Trump’s Tariff Policies: Impact on Industry and Trade Relations

President Donald Trump’s tariff policies focus on key industries, including automobiles, metals, and trade with China, Canada, and Mexico. These measures have significant implications for global trade, industry competitiveness, and economic stability.

1. Impact on Industries

Automobile Industry 🚗

Tariff: 25% on imported cars and car parts (effective May or later).
Impact on US Consumers: Higher car prices as manufacturers pass costs onto buyers.
Impact on US Automakers: Mixed—some benefit from reduced competition, while those reliant on imported parts face increased costs.
Impact on Foreign Automakers: European, Japanese and UK brands with strong U.S. presence are significantly affected.

Steel & Aluminum Industry 🏗

Tariff: 25% on all steel and aluminum imports (effective March 12).
Impact on US Steel Producers: Boosts domestic production but raises costs for industries dependent on steel (e.g., auto manufacturing, construction, appliances).
Impact on Foreign Suppliers: Major exporters like Canada, Mexico, and the EU face increased trade barriers.

Agriculture & Food Industry 🌾🥑

Tariff Reduction: Potash (fertilizer) tariff cut from 25% to 10%.
Exemptions: North American goods such as avocados, beef, and air conditioners.
Impact on U.S. Farmers: Lower fertilizer costs benefit farmers, but retaliatory tariffs on soybeans, pork, and dairy hurt exports.

Energy Sector ⚡

Tariff: 10% on Canadian energy imports (effective March 4).
Impact: Higher fuel costs for U.S. consumers and industries reliant on Canadian oil and gas.

2. Impact on Trade Relations

U.S.-China Relations 🇺🇸🇨🇳

Tariff Increase: 10% on Chinese goods raised to 20% (effective March 4).
Exemptions: Shipments under $800 remain tariff-free (effective Feb 7).
Impact:
- Higher costs for U.S. businesses dependent on Chinese imports (electronics, textiles, machinery).
- Possible Chinese retaliation with tariffs on U.S. products (soybeans, semiconductors, aircraft).
- Prolonged trade tensions disrupting global supply chains.

U.S.-Canada & U.S.-Mexico Relations 🇺🇸🇨🇦🇲🇽

Tariff: 25% on Mexican and Canadian goods (effective March 4).
Exemptions: Cars meeting NAFTA rules temporarily exempt (effective March 5).
Impact:
- Potential strain on USMCA (formerly NAFTA), increasing costs for North American businesses.
- Canada’s energy exports to the U.S. become less competitive.
- Mexico’s auto exports suffer, impacting jobs and trade relations.

U.S.-European Union (EU) Relations 🇺🇸🇪🇺

Trade Deficit Concern: The U.S. had a $213 billion trade deficit with the EU in 2024.
Impact:
- The EU may impose retaliatory tariffs on U.S. goods (e.g., bourbon, motorcycles, tech products).
- Risk of an escalating trade war, slowing economic growth on both sides.

3. Economic Risks & Outlook

Inflationary Pressure: Higher costs for cars, steel, and other imports could drive inflation.
Risk of Recession: Trump acknowledges a potential slowdown, but Commerce Secretary Howard Lutnick argues the tariffs are “worth it.”
Global Trade Uncertainty: Businesses may shift supply chains outside the U.S. to avoid tariffs.

Conclusion

Trump’s tariffs are reshaping global trade, intensifying geopolitical tensions, and creating economic uncertainties. While intended to boost the U.S. economy and reduce trade deficits, these policies carry risks, including inflation, recession, and strained international relations. The coming months will determine how businesses, consumers, and global partners adapt.

Impact on the UK: Tariffs and Potential Job Losses

Trump’s latest tariffs could significantly impact the UK, particularly in the automotive, pharmaceutical, and manufacturing industries.

Key UK Industries Affected

Automotive 🚗

The UK exports over 101,000 vehicles worth £7.6 billion to the U.S. annually.
A 25% U.S. tariff could put 25,000 British car jobs at risk, particularly at Jaguar Land Rover and Mini.
Manufacturers may shift production to the U.S. to avoid tariffs.

Pharmaceuticals 💊

The U.S. accounts for 50% of the global pharma market.
Tariffs could disrupt supply chains, increase drug prices, and hinder innovation.

Food & Drink 🥃

The Scotch whisky industry—exporting nearly £1 billion annually—could suffer from renewed tariffs, as seen in 2019, when a 25% duty cost the sector £600 million in lost exports.

Steel & Aluminum 🔩

British steel manufacturers remain subject to Trump’s 25% tariffs, creating long-term economic challenges.

How Should the UK Respond?

Prime Minister Keir Starmer faces critical decisions in addressing Trump’s tariffs:

Diplomatic Negotiation – Seeking exemptions, though uncertain given Trump’s protectionist stance.
Retaliatory Tariffs – Could escalate tensions but might pressure the U.S. to reconsider.
Allied Strategy – Partnering with the EU, Canada, and other affected nations to strengthen the UK’s position.
Industry Adaptation – Encouraging UK manufacturers to shift production to the U.S. to avoid tariffs.
Market Diversification – Expanding UK exports beyond the U.S. to mitigate risks.

Trump’s “Liberation Day” tariffs are framed as a boost for U.S. industry, but they pose a major challenge for the UK.

Should Starmer push back aggressively or focus on negotiations to protect British industries?