Donald Trump has reignited a contentious trade war with Europe by imposing extensive tariffs on imported steel and aluminium. This move is a part of his long-standing protectionist agenda, mandating that businesses importing these metals into the United States must now pay a hefty 25 percent tax. The introduction of these tariffs has already sparked global economic tensions, with the European Union vowing to retaliate with significant countermeasures.
The repercussions for the UK are considerable. British steel producers, who export approximately 10% of their goods to the US, may find it increasingly difficult to compete, while manufacturers that depend on American products could face rising costs. Consumers are also likely to feel the impact—escalating tariffs could lead to higher prices for a variety of items, from automobiles to electronics and even fuel. Although the UK government has not indicated plans for a direct response, the economic fallout from Trump’s trade war is already being felt.
Here is everything you need to know about Trump’s tariffs in under five minutes:
The UK probably won’t retaliate, but the EU will
In an effort to level the playing field, countries affected by Trump’s tariffs might choose to impose their own tariffs in retaliation, potentially igniting a global trade conflict. Treasury minister James Murray stated on Wednesday morning that the UK “reserves our right to retaliate,” although he emphasized that the government has firmly ruled out such a course of action at this time.
The i Paper has learned that while the option for retaliation remains on the table for the UK, officials are choosing to observe how Trump’s administration—currently causing significant market anxiety in the US—unfolds. Thus far, it seems that overtures from Sir Keir Starmer and Business Secretary Jonathan Reynolds to their US counterparts have not secured an exemption for the UK.
While the UK holds back, the EU is taking decisive action and has promised to respond in kind to the flat-rate tariffs. The bloc has announced it will impose €26 billion (£22 billion) worth of “countermeasures” against the US, with European Commission President Ursula von der Leyen labeling the tariffs as “unjustified trade restrictions.” She asserted, “The European Union must act to protect consumers and businesses,” shortly after the new tariffs were enacted at 4 am GMT.
What is a tariff?
A tariff is a tax imposed on imported goods, designed to regulate trade by making foreign products more expensive. There are two main types of tariffs: ad valorem tariffs, which are calculated as a percentage of the product’s value, and specific tariffs, which are set fees per unit (e.g. per ton or per item). The steel tariffs being introduced by the US fall into the former category. Tariffs can serve multiple purposes, including protecting domestic industries from cheaper foreign competition, generating government revenue, or retaliating against perceived unfair trade practices. While tariffs can boost local production, they may also lead to higher consumer prices and trade disputes if countries retaliate against each other’s exports.
The tariffs will squeeze UK manufacturers
The tariffs on steel imports mean that any US business wishing to import steel and aluminium will have to pay an additional 25 percent. This will have detrimental consequences for the UK’s steel industry. The US is the UK steel industry’s second-largest export market after the EU, with roughly 10 percent of British steel exports destined for America. In 2023, Britain exported 166,433 tonnes of steel to the US.
Gareth Stace, the director general of the trade association UK Steel, remarked that the tariffs “couldn’t come at a worse time” for the sector, which is already grappling with high energy costs and subdued domestic demand amid “an oversupplied and increasingly protectionist global landscape.” Nadine Bloxsome, chief executive of the Aluminium Federation, echoed these concerns, stating that the UK is “already seeing the first impacts of these tariffs.” She cautioned that the increasing demand for scrap metal is encouraging more UK exports, which could undermine the country’s recycling efforts and sustainability objectives. Concurrently, the influx of cheaper imported aluminium products may inundate the UK market, further complicating competition for local manufacturers.
Moreover, these tariffs may contribute to US inflation, keeping interest rates elevated and raising the risk of an economic downturn that could affect global growth, including the UK, where higher rates might hinder economic expansion.
The price of everyday items could go up
Trump’s steel tariffs could create ripple effects throughout the UK economy, influencing everything from car prices to mortgage rates. Vehicles imported from the US might see significant price increases, with tariffs on Canadian and Mexican parts projected to raise costs by as much as £9,400, according to US consultancy Anderson Economic Group. UK manufacturers such as Volkswagen and Stellantis, which rely on supply chains in Mexico, could also experience the pressure.
Industrial machinery and electronics may face price hikes as tariffs disrupt global supply chains. US-made circuits used in UK car production could become more expensive if tariffs inflate the cost of Chinese chips. Additionally, rising oil prices due to oversupply concerns are likely to result in higher fuel costs at UK petrol stations.
The UK’s close trade ties with the EU—where 40 percent of our trade occurs—mean that tariffs on European goods could have indirect effects as well. Some experts suggest that the consequences are already becoming evident, with a weaker pound exacerbating import costs. Should global inflation increase, UK interest rates might remain high for an extended period, raising borrowing costs and mortgage rates, making Trump’s tariffs a significant concern for British households and businesses.
