Update on US Tariffs
Background
The US announced new tariffs on 2nd April, including 10% tariffs on all UK imports. This was lower than many other countries including China, Japan and the EU. They also announced a change to the de minimis rules, removing the $800 rule for imports from China and Hong Kong.
The UK Government, alongside other trading blocs including the EU is currently considering its response. It is clear the US announcement will create significant disruption to global trade and all governments are trying to assess the impact on their economies.
Impact on Retailers
There are several ways the US decision will impact on retailers
· For those exporting to the US there will now be the additional tariffs increasing pressure on prices for US consumers. Those retailers routing products from China via UK will face much larger tariffs of 34%.
· Potential impact of retaliatory action on US imports for the UK market. Although retail imports are a relatively small part of the UK supply chain. US retail imports are £1.39bn, of a total goods import cost of £57.9bn
· Increased pressure on the UK economy and retail market. Disruption to the wider economy and uncertainty around global trade are expected to impact the economy, possibly adding to inflation and consumer confidence.
· There is a possibility prices could actually fall for some products in the short term. As exporters look for cheaper markets than the US more could be available to UK imports. However, it is difficult to assess the scale of the impact and the UK Government is suggesting it will take steps to prevent any dumping of goods which affects domestic producers.
· Checks on imports and time at the borders could increase. There has already been problems prior to the announcement and the US Government has said it will increase surveillance of imports.
· Depending on the reaction of the EU and UK, retailers sending products from GB to Northern Ireland under the Windsor Framework could face increased regulatory controls
Government Reaction
The Government is taking a measured response. Supported by discussions with UK businesses it has not knee jerked with retaliatory tariffs. It has, however, said all options remain open and announced on the 3rd April a consultation with businesses on where retaliatory sanctions might be used. This request for input will be open until 1 May and can be read here. The consultation covers a huge range of products, including food and drink and consumer goods.
The UK is also pursuing a trade deal with the US which could remove the tariff problem. It is trying to resolve this quickly but there are potentially contentious issues, particularly around food production.
BRC Action
We have discussed the situation with both DBT and Defra, to understand the wider impact on the economy and feedback retail’s position, in terms of the US decision. On the trade deal, we have said we see merits in it but it shouldn’t compromise UK producers, particularly farmers. We have also raised concerns with DBT over the de minimis rule. Although the change in US de minimis only applies to imports from China and Hong Kong, there are concerns this could be extended which would impact UK retailers if it applied to our exports.
We will continue to liaise with the Government. Once the Government has clarified its position we will arrange a call for members with a senior official from DBT to give the perspective on global trade and the consequences for your business.
Finally, we are responding to media queries. We are taking a measured approach, recognising the significant threat, particularly as the sector faces large additional costs but not over stating its impact at this stage.
Our quote is ‘“Trade barriers create uncertainty for businesses, increasing global prices of goods and putting further pressure on inflation. Retailers in the UK already face significant cost pressures from rising employer NICs, higher NLW, and a new packaging tax; further global cost pressures would be unwelcome for retailers and their customers alike.
“Nonetheless, the import and export of retail goods from and to the US remains relatively small compared to other industries, limiting the direct impact on retailers and consumers.”
