President Trump announced sweeping tariffs on Wednesday 2 April, 'Liberation Day', the ramifications of which will be felt deeply around the world.
The announcements are deeply concerning for businesses, who have already raised concerns about the ongoing uncertainty and disruption. The UK must use this unpredictable period to double down on its commitment to free and fair trade. Doing so will provide businesses with the confidence they need to kickstart growth, foster innovation, and boost productivity.
What has been announced?
President Trump signed an Executive Order declaring a national emergency due to national and economic security concerns arising from US goods trade deficits. He called this America's 'Declaration of Economic Independence'. By declaring a national emergency, he is now able to impose tariffs - a power normally reserved for Congress.
He announced the following new tariffs:
- Effective at midnight (5.01am UK time) 3 April, all foreign made automobiles will be subject to a 25% tariff
- Effective at midnight (5.01am UK time) on 5 April, a flat 10% tariff rate will be applied to all countries. Trump called this a 'kind reciprocal, not full reciprocal' plan
- Effective at midnight (5.01am UK time) on 9 April, additional tariffs will then be levied on the 60 'worst offenders' worldwide - these rates will vary between countries.
The EU will now face 20% tariffs, China will face 34% (in addition to previously announced tariffs), and India will now face 26% tariffs.
Which announcements relate directly to the UK?
A flat 10% tariff rate will be applied to all UK goods entering the US from midnight (5.01am UK time) on 5 April. This is the most favourable tariff rate levied on any G7 economy in the world.
The UK remains subject to previously announced 25% tariff on steel and aluminium, which came into force on 12 March. For now, it appears that the new 10% baseline tariff will not be applied in addition to the 25% tariff.
UK automakers will also face a flat 25% tariff.
How might UK businesses be impacted?
The situation remains very fluid, and we are prepared for more developments in the coming days and weeks - these developments will undoubtedly affect the extent to which firms are impacted. CBI members have already reported that they are dealing with increased costs, additional uncertainty, and supply chain disruption - challenges which may be exacerbated given the complexity of varying tariff rates across the world.
We are particularly concerned about Northern Ireland being caught in the crosshairs of an EU-US trade war. Under the Windsor Framework, Northern Ireland has access to both the UK and EU markets. This means that Northern Ireland would be forced to impose any retaliatory tariffs levied by the EU onto US imports.
Our Economics team will also be producing a more detailed analysis in the coming days as more details become clear. This will be similar to our analysis released in February.
What is the UK Government doing?
The Prime Minister said the UK's first response to US tariffs should not be to jump into a trade war.
Government continues to advance negotiations for an economic prosperity deal, which is expected to outline closer cooperation and alignment on areas like technology and artificial intelligence. It is hoped that this deal will result in a reversal of the newly announced 10% tariffs on UK goods.
What is the CBI doing?
The CBI has issued a press release in response to President Trump's announcements and our Chief Executive, Rain Newton-Smith, appeared on Sky News and Times Radio on Wednesday 2 April.
We are liaising directly with BusinessEurope, the B7 (which includes business organisations from the G7 countries - the US, Canada, Japan, France, Germany and Italy) and our sister federations across the globe to understand the impact of the announced tariffs.
The CBI is also gathering immediate member insights to share with government officials at all levels - from the Business Secretary and the Chancellor to working level officials. This is in addition to the meetings held and detailed insights already shared with government following the Q1 Council, Committee and Working Group round and additional member meetings.
How can my business get involved?
Please contact Erin Henwood to share your thoughts on the announcements, how they might impact your business, and any retaliation you would like to see from the UK Government.