For four days in April, Brexit supporters finally thought they had a ‘dividend’ to celebrate. The UK was hit by a 10% tariff rate from the US, with the EU fronting a 20% fee. However, President Trump reduced the latter down to 10% within a week – wiping out the perceived advantage.
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No Brexit benefit yet: How is the UK paying more on tariffs than the EU?
And, unfortunately for those on Team Leave, things only go downhill from here. According to data released by Capital Economics this week, the UK actually harbours a higher tariff burden than the EU – due to the type of goods that are exported to America.
Amid the flurry of tariffs, Donald Trump also issued a number of exemptions. These include goods from the pharmaceutical industry, alongside exports of electronic goods. In these markets, the EU does a higher proportion of their trade with America than the UK.
‘Type of goods’ and ‘volume of exports’ skews US tariff rates
As per the research, Britain has ended up with the wrong end of the stick. Two of our biggest exports – steel and motor vehicles – still face a levy of 25%, which is much higher than the current baseline figures. This has resulted in a cost disparity between the UK and the EU.
Capital Economic’s calculations show that the average charge on British goods going to the US is up at 11.6%, due to the higher levvies. In the EU, the average tariff price is lower, at around 9.5%, largely thanks to the ‘carve-outs’ for medical supplies.
No Brexit relief as higher tariffs on steel, cars hit the UK
This has created a gulf of 2% between the average cost of tariffs for the UK and the EU. Now, should Trump reinstate the 20% tariff rate on the EU – as he has promised to do by July – this could change the figures slightly. But, as per The Telegraph, the ring-fence on pharmaceutical goods is likely to limit the impact.
The EU also has the option of 25% retaliatory tariffs on American goods, which it had already planned to implement before the US announced a pause on the higher rates. Either way, Britain’s fabled ‘Brexit benefit’ doesn’t seem to stand up to much scrutiny.