UK’s Delicate Juggling Act Between Washington and Brussels
A Win for the UK, but at What Cost?
The UK’s secretary of state for business and trade, Jonathan Reynolds, arrives for a cabinet meeting in Downing Street, London, on March 26, 2025. (AP pic)
LONDON: More than four years after the UK’s withdrawal from the European Union became effective, it has escaped harsher US tariffs, facing only half of the 20% imposed on its EU neighbors.
A Cautious Response
However, London’s cautious response to the 10% tariffs imposed on Wednesday by US President Donald Trump highlights its delicate juggling act between its two largest trading partners. The Labour government is keen to avoid jeopardizing negotiations over a post-Brexit trade deal with Washington.
A Mixed Bag for the UK
"I recognize the announcements by the president last night put the UK in a relatively better position than, for instance, the EU," business Secretary Jonathan Reynolds told Sky News. Although he called the 10% levy "a disappointment," it is significantly lower than the 20% levy on the EU and the 34% levy on China.
A Post-Brexit Win?
Prime Minister Keir Starmer told business chiefs on Thursday that "clearly there would be an economic impact" from the tariffs, but avoided stronger comments made by other major economic powers that hinted at retaliation. With the UK receiving the lowest band of tariffs, the opposition party, the Conservatives, has touted it as a post-Brexit win.
Andrew Griffith, the Conservatives’ business and trade spokesman, said the US’s approach on tariffs was a "vindication" for Brexit. The Labour government, which won power in July, had a more muted response.
The Economics of Tariffs
For the UK, "it’s a ‘win’ in that we would be worse off if we were still in the EU," Jonathan Portes, professor of economics at King’s College London, told AFP. "But of course the main point is that this is lose-lose for everybody," he added, as tariffs threaten to stifle economic growth.
Washington or Brussels?
Starmer visited Washington at the end of February and came away hopeful a long-awaited accord could be reached. Trump himself held out the prospect of a "great" deal that could avoid tariffs on the UK, hailing Starmer as a tough negotiator. Portes explained that the lower tariff rate has "nothing to do with any negotiations or special treatment," and instead, relates to the fact the UK does not have a goods trade surplus with the US.
The UK’s Trading Partners
The US accounted for 15% of the UK’s goods exports and 10% of its goods imports in 2023, according to the latest annual data from the office for national statistics. The British government has reiterated that it does not need to choose between the Washington and Brussels. Yet some economists have warned that concessions to the US could spook partners in the EU, which remains by far the UK’s largest trading partner.
A Delicate Balance
"Right now it would be better to pursue a deeper EU trade relationship to make up for the economic hit," from American customs duties, said David Henig, director of the UK trade policy project. The government is consulting with exporters on the impact of possible retaliatory action.
The Impact on Industry
"If we are in a position to agree an economic deal with the US that lifts the tariffs that have been placed on our industries, this request for input will be paused and any measures flowing from that will be lifted," Reynolds said. Trade body Make UK said the tariffs were "devastating for UK manufacturing."
"It will destroy decades of integrated supply chains connecting the UK with US through other trading partners such as the EU, Canada and Mexico," chief executive Stephen Phipson said.
Conclusion
The UK’s delicate juggling act between Washington and Brussels has resulted in a mixed bag for the country. While the lower tariff rate is a "win" for the UK, it comes at a cost. The country must now navigate the complex web of trade relations with its two largest trading partners, all while trying to avoid jeopardizing negotiations over a post-Brexit trade deal with Washington.
FAQs
Q: What are the tariffs imposed by the US on the UK?
A: The US has imposed a 10% tariff on the UK, significantly lower than the 20% levy on the EU and the 34% levy on China.
Q: Why did the UK get a lower tariff rate?
A: The lower tariff rate is due to the fact that the UK does not have a goods trade surplus with the US.
Q: What is the impact of tariffs on the UK’s economy?
A: Tariffs threaten to stifle economic growth and could have a negative impact on the UK’s manufacturing industry.
Q: What is the UK’s policy on tariffs?
A: The government is consulting with exporters on the impact of possible retaliatory action and is working to agree an economic deal with the US that lifts the tariffs.