How Will President Trump’s Global Tariffs Impact UK Businesses?

Without doubt, 2nd April 2025 will be remembered for many months to come by businesses and Governments around the world, with President Trump’s decisions having a massive impact on global trade.

Economists are already predicting that these tariffs will increase consumer costs across the world and there is a high risk of a global recession.

The plan is simple – to increase costs for importing overseas products to encourage the manufacture of products within the United States. President Trump intends to remove the USA’s reliance on overseas imports and make it more self sufficient.

Customs and Excise Duty

This has been the basis for previous measures and new tariffs are designed to target countries who impose ‘trade barriers’ which have impacted the USA’s ability to maintain a competitive manufacturing sector.

In his announcement, 2nd April 2025, President Trump confirmed that an immediate 10% base line tariff would be introduced on 5th April with further reciprocal, tariffs being imposed from 9th April 2025. Although ‘full reciprocal’ tariffs were considered, it was determined that a discounted rate of up to 50% would be imposed.

These new tariffs will apply to all goods that are not already subject to Executive Orders (e.g. Steel and Aluminium) as those rates continue to apply.

Origin

It is important to note that the tariffs are based on the ‘Origin’ of the imported goods and not where the goods are exported from. This fact creates additional complexities for the US importer as exposure to the variances as provided below mean that calculating landed price costs is very difficult, especially if same parts are sourced from various manufacturers located across the globe.

It will not be as simple as routing goods through a favourable country, say the UK, and expecting the UK’s 10% tariff to apply to goods which have been manufactured in the EU. Expect an increased focus on this important aspect of international trade.

So how do these tariffs impact the UK and EU and how have other countries reacted to the threat of additional tariffs?

Unlike the EU, the UK continues to push forward on establishing a trade agreement with the US and feels this is the best way to minimise the impact on UK business. It will be interesting to see if this is successful, especially as President Trump considers taxes such as VAT to be a barrier to trade.

The EU has already delayed the initial, Phase 1, of the two-part retaliatory measures that were announced in early March with the intention to issue both phases at the same time. This change will allow the EU to review the impact of the above tariffs and adjust the scope of their planned response. The 20% tariff will have a significant impact on dominant sectors such as the Automotive and Pharmaceuticals as supply chains will prove very difficult to untangle.

In response to the possible imposition of tariffs, Vietnam announced on the 31st March that it would reduce tariffs on many products commonly imported from the US such as automobiles, wood products, ethanol, frozen chicken thighs, pistachios, almonds, fresh apples, cherries, and raisins.

Although we do not have full details on how the reciprocal tariffs were determined, these changes do not appear to have made a significant difference to the tariffs imposed on Vietnam.

VAT – are the accusations true?

The misinformation about VAT is worrying. VAT is not a cost to most businesses. A US Company importing goods into the UK and selling on to businesses or consumers in the UK will be able to recover that VAT. VAT is a cost to the consumer, just as sales tax is to the US consumer. 175 countries around the world have VAT, it is an important part of these countries Treasury receipts. To abolish VAT which has been in force since 1973 in the UK is not going to be a short term measure.