President Donald Trump’s plan to impose reciprocal tariffs factoring in VAT has sparked concerns over its potential impact on UK exports, including cars, pharmaceuticals, and food products. British businesses now face uncertainty as the US aims to protect domestic markets.
President Donald Trump’s latest trade move has raised alarm among UK businesses, as his administration plans to target value-added tax (VAT) in calculating new tariffs, according to a BBC report. This unexpected development has cast uncertainty over the UK’s trading relationship with the US, raising fears of significant economic consequences.
Trump’s directive, unveiled Thursday, instructs his staff to design “reciprocal tariffs” based on individual countries’ trade agreements with the US. This approach, which factors in VAT alongside imports and exports, could leave the UK more vulnerable to punitive measures than previously anticipated.
Traditionally, the UK’s balanced trade relationship with the US was believed to offer some protection against hefty tariffs. However, analysts now warn that the inclusion of VAT as a metric could lead to tariffs of 20% or higher, mirroring potential rates on European Union goods. The specifics of how these tariffs will be applied remain unclear, but the uncertainty is already causing concern.
The British Chambers of Commerce (BCC) issued a stark warning, highlighting that key UK sectors—such as automotive, pharmaceuticals, and food and drink—could face severe repercussions if the tariffs are implemented. “These proposed measures could significantly hit British businesses,” a spokesperson for the BCC said.
Trump’s move is part of his broader push to safeguard American industries and bolster domestic manufacturing. The White House has justified such measures as a response to trade imbalances, with Trump frequently criticising countries that maintain trade surpluses with the US. Under his directive, tariffs could also serve as retaliation for perceived “unfair or harmful acts, policies, or practices” by other nations.
While the UK had initially hoped for a less confrontational trade relationship with the US post-Brexit, the latest tariff proposal has thrown that assumption into question. Trade analysts suggest that the UK may now be in a similar position to the European Union, which has long been a target of Trump’s trade policies.
The move comes at a particularly delicate time for UK businesses, many of which are grappling with economic pressures linked to inflation and ongoing post-Brexit adjustments. A sudden imposition of tariffs could exacerbate these challenges, adding costs and complicating access to the lucrative US market.
With the UK government yet to respond formally, the proposal has sparked calls for urgent diplomacy to prevent further economic fallout. Trump’s focus on VAT has introduced a new dimension to the trade debate, leaving British businesses bracing for potential upheaval.
