LONDON: After boasting for months about its preferential trade deal with US President Donald Trump, the United Kingdom is at risk of becoming the biggest loser in the aftermath of the Supreme Court’s decision to strike down his global tariffs.
Britain had enjoyed a relatively lower reciprocal tariff rate at 10% compared to other countries – giving it a competitive advantage – but Trump’s promise to reimpose them at 15% for all nations means businesses may now face even higher duties.
The United Kingdom will see the largest increase as a result, followed by Italy and Singapore, according to Global Trade Alert, while Brazil, China and India stand to benefit the most.
“At the moment, we have no clarity on whether the 10% tariff agreed will be honoured, but until and unless the United States gives a steer, we’ve got to assume it’s 15%,” said Sam Lowe, a trade specialist at strategic advisory firm Flint Global in London.
UK officials are now anxiously trying to persuade the US administration to exempt it from the higher rate. The British Chambers of Commerce estimated that would raise the cost on UK exports to the United States by as much as £3bil (US$4bil) and will impact 40,000 British companies.
“We are having conversations at the highest levels to make sure that what we regard as being in our national interest is heard loud and clear with our American counterparts,” Cabinet minister Bridget Phillipson told Sky News on Sunday.
She acknowledged the “uncertainty it does cause” for UK businesses.
Trump’s new tariff regime, imposed under Section 122 of the 1974 Trade Act, can apply for a maximum of 150 days unless Congress extends it.
The tariff exemption on steel, pharmaceuticals and automotives, which was previously agreed between the United Kingdom and the United States, is expected to remain in place, giving Britain continued preferential status on those key sectors.
“Under any scenario, we expect our privileged trading position with the United States to continue,” a government spokesperson said.
Still, businesses exporting other products to the United States, from scotch whisky to toys, will “now face a higher tariff, equivalent to what the European Union was facing before,” said Crawford Falconer, Britain’s former top trade negotiator.
“It would appear on face of it that Australia and the United Kingdom have been most negatively affected: there will be a desire to get clarity and indeed get it lowered.” Australia was also subject to the 10% rate before the Supreme Court ruling.
The United Kingdom has already expended significant diplomatic capital to extract preferential treatment from the White House.
And last month, Prime Minister Keir Starmer helped persuade Trump to walk back his threat to impose higher tariffs on Europe in retaliation for the continent’s support for Denmark and Greenland.
The so-called “special relationship” between the two nations was strained further last week when Trump lashed out against the United Kingdom’s deal to hand over sovereignty of the Chagos Islands to Mauritius.
That appeared again in retaliation for Britain holding off on giving him permission to use the archipelago’s Diego Garcia military base for a possible strike on Iran.
Trump and his team are also likely to be distracted by the setback to the tariff regime, which due to lower rates now set to apply to countries like India and Indonesia, means the United States has “lost quite a bit of tariff revenue”, said Falconer.
“They will be spending the next five months finding other ways to plug the gaps,” Falconer said. “To try to get time with the United States to fix the United Kingdom’s particular problem will be rather difficult.” — Bloomberg
