Everyone’s talking about tariffs – five key things to know in under five minutes ...Middle East

Donald Trump has reignited a trade war with Europe by imposing sweeping tariffs on imported steel and aluminium.

The move, part of his long-standing protectionist agenda, means that businesses bringing these metals into the US must now pay a 25 per cent tax.

The tariffs have already triggered global economic tensions, with the European Union vowing to retaliate with billions in countermeasures.

The impact on the UK is significant. British steel producers, who send around 10% of their exports to the US, could struggle to compete, while manufacturers relying on American goods may face higher costs. Consumers, too, could feel the effects—rising tariffs may push up prices for cars, electronics, and even petrol.

While the UK government is not planning to respond directly, the economic consequences of Trump’s trade war are 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

To even out the playing field, countries and jurisdictions impacted by Trump’s tariffs could opt to levy their own in response, sparking a global trade war.

Treasury minister James Murray stated on Wednesday morning that the UK “reserves our right to retaliate” before reiterating that the Government has firmly ruled out this route.

The i Paper understands that this option is still on the table for the UK but that officials are waiting to see how Trump’s new regime, which is causing significant market jitters in the US, plays out.

So far, it appears that Sir Keir Starmer and Business Secretary Jonathan Reynolds’s overtures to their US counterparts have not secured the UK an exception.

But, while the UK is holding back, the EU has taken the front foot and has promised to react in kind to the flat-rate tariffs.

The bloc has announced it will impose €26bn (£22bn) of “countermeasures” on the US, with European Commission President Ursula von der Leyen calling the tariffs “unjustified trade restrictions”.

“The European Union must act to protect consumers and business,” she said shortly after the new tariffs came into force at 4 am GMT.

What is a tariff?

A tariff is a tax imposed on imported goods which aims to regulate trade by making foreign products more expensive.

There are two main types: ad valorem tariffs, which are a percentage of the product’s value, and specific tariffs, which are fixed fees per unit (e.g. per ton or per item). The steel tariffs the US is imposing fall into the former category.

Tariffs serve various purposes, such as protecting domestic industries from cheaper foreign competition, generating government revenue, or retaliating against unfair trade practices.

While tariffs can boost local production, if countries impose retaliatory measures on each other’s exports, they may also lead to higher consumer prices and trade disputes.

Tariffs on steel imports mean that any US business wanting to bring steel and aluminium into the country will have to pay an extra 25 per cent.

This will have knock-on effects for the UK’s steel industry. The US is the UK steel industry’s second-largest export market after the EU, with around 10 per cent of British steel exports heading across the Atlantic. In 2023, Britain exported 166,433 tonnes of steel to the US.

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Gareth Stace, the director general of trade association UK Steel, said the tariffs “couldn’t come at a worse time” for the sector, which is fighting high energy costs and subdued domestic demand alongside “an oversupplied and increasingly protectionist global landscape”.

Nadine Bloxsome, chief executive of the Aluminium Federation, echoed his concerns, saying that the UK was “already seeing the first impacts of these tariffs.”

She warned that the rising demand for scrap metal was encouraging more UK exports, which could weaken the country’s recycling efforts and sustainability goals.

At the same time, cheaper imported aluminium products may flood the UK market, making it harder for local manufacturers to compete.

Tariffs may fuel US inflation, keeping interest rates high and risking a downturn that impacts global growth, including the UK, where higher rates could slow economic expansion.

The price of everyday items could go up

Trump’s steel tariffs could have ripple effects on the UK economy, affecting everything from car prices to mortgage rates.

Cars imported from the US may become significantly more expensive, with tariffs on Canadian and Mexican parts expected to push prices up by as much as £9,400, according to US consultancy Anderson Economic Group. UK manufacturers like Volkswagen and Stellantis, which rely on supply chains in Mexico, could also feel the strain.

Industrial machinery and electronics may see price hikes as tariffs disrupt global supply chains.

US-made circuits used in UK car production could become more expensive if tariffs drive up the cost of Chinese chips. Meanwhile, oil prices have already risen due to oversupply concerns, likely leading to higher fuel costs at UK petrol stations.

The UK’s close trade ties with the EU—where 40 per cent of our trade takes place—mean tariffs on European goods could also have indirect effects.

Some experts say the impact is already visible, with a weaker pound increasing import costs.

If global inflation rises, UK interest rates could stay high for longer, pushing up borrowing costs and mortgage rates, making Trump’s tariffs a concern for British households and businesses.

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