The UK avoids Trump's steel tariffs hike - for now. Here's what you need to know.
Donald Trump has temporarily exempted the UK from his executive order doubling the base rate of tariffs on steel and aluminium from 25% to 50%. The UK’s rate will remain at 25% until at least 9 July 2025, due to the recently agreed UK-US Economic Prosperity Deal (EPD) - but with a warning that the exemption relies on the EPD being implemented. So what is in the EPD? And what do these latest tariffs mean for the UK?
What has Trump announced?
The US tariffs on steel and aluminium imports have now come into effect at a rate of 50%, which Trump claims will help to rebuild the industrial capacity of his country - though clearly the move is the latest in Trump's playbook of using tariffs as a coercive bargaining chip for future trade deals.
The move has drawn criticism from America’s trading partners, particularly those in the European Union and China who see the implementation of a 50% tariff as near fatal for exporters. The EU has previously agreed to a package of €21 billion retaliatory measures and may choose to react in time, although we are unlikely to see an immediate response.
How will this affect the UK?
The UK is the only country in the world which has thus far avoided the increase in the tariff rate, maintaining the 25% level previously applied. Our exemption from the new tariff is not a guarantee, however - the US has indicated that the UK could see its rate doubled to 50%, should the terms of the UK-US Economic Prosperity Deal not be met.
What is in the UK-US Economic Prosperity Deal?
The implication from the White House’s messaging is that whilst the UK and US have agreed to a deal in principle, the deal is far from complete. The implementation of a deadline - 9 July - adds an extra element of urgency to proceedings. But given the phraseology of the threat as “on or after” 9 July, there may be sufficient bandwidth for an extension if Trump feels progress is being made.
The EPD contains details on the mutual reduction of tariffs by the UK and the US. For example, the UK has removed the 20% tariff on US beef imports and increased the country's quota from 1000 to 13,000 tonnes a year. Meanwhile, the US has cut UK tariffs from 25% to 10% for a quota of 100,000 cars (roughly the number the UK typically sells into the US market each year).
However, when it comes to the requirements on the UK government to secure further tariff reductions below the current rate of 25% and to avoid the uplift to 50% on steel and aluminium, the EPD requires the UK to meet “US requirements on the security of supply chains of steel and aluminium products intended for export to the US, and on the nature of ownership of relevant production facilities”.
Although the US's concerns with UK supply chains and 'ownership of production facilities' in the UK are not clearly defined, it has been widely assumed to relate to the involvement of Chinese raw materials and companies in the industry. When announcing the UK-US agreement, US Secretary of Commerce Howard Lutnick bemoaned the fact that the British steel industry had been ‘destroyed by people dumping steel into their markets’.
Stability or instability? That is the question.
The 9 July deadline for progress on meeting the security and ownership requirements for UK steel and aluminium production adds further uncertainty to an industry dogged by volatility this year. Whether or not the UK government can meet Trump's demands, the US government's volatile approach to tariffs is a painful reminder thatTrump is an unreliable trading partner. And, as we've seen in the nine years since the Brexit referendum, where there is instability, there is a reduction in business investment and economic prosperity.
In response, the UK government should prioritise deepening ties with our more reliable trading partners. Whilst 41% of total UK exports (goods and services) go to the EU, a staggering two-thirds (67%) of all the steel we export is sent across the channel to our largest trading partner, meaning that the UK is even more reliant on the European market for steel than other goods. In comparison, we export just 6.2% of our steel to the US, which is more than ten times less the amount we sell to the EU.
The UK's steel industry does not get the same political attention as the burgeoning AI industry, for example, but it remains of critical importance to the country. It employed around 37,000 people in 2023, generating £1.7 billion that year alone, and is vital to communities in places like Wales and Yorkshire, where nearly half of all UK steel workers are based.
For the good of our regional economies, the UK must continue building on the successful UK-EU Summit, and prioritise tearing down trade barriers with our largest market - to restore business confidence, protect jobs and stimulate the growth our economy so desperately needs.