Understanding Trump’s new reciprocal tariff plan: What it means for UK exporters

The Trump administration has announced a significant new tariff policy set to reshape America’s trade relationships worldwide.

As outlined in the “Fact Sheet: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security” released by the White House on April 2, 2025, these measures aim to address what the administration sees as longstanding imbalances in global commerce.

What are the new tariffs?

President Trump’s recent executive order will implement a new tariff structure:

• Baseline 10% tariff on imports from ALL countries (with some exceptions for Canada and Mexico)
• Country-specific “reciprocal” tariffs based on the administration’s assessment of each nation’s trade practices
• Implementation is reported to be immediate according to White House press secretary Karoline Leavitt, though the official documentation mentions April 5 and April 9 phase-in dates

In addition, the president has announced a separate 25% tariff on all foreign-made automobiles, which went into effect immediately at midnight on April 2, 2025.

This tariff applies to all imported vehicles, including those from the UK such as Jaguar Land Rover (JLR).

UK-manufactured vehicles would face both this 25% automotive tariff and the applicable reciprocal tariff (10% for UK origin).

Unlike some previous tariff actions that targeted specific industries or products, this approach is comprehensive, covering most imports with certain exceptions.

It’s important to note that these tariffs will be applied in addition to any existing Most Favored Nation (MFN) duties already imposed on specific products. This means the actual duty rate for many products will be the sum of:

1. Existing product-specific MFN duty rates
2. The new country-specific reciprocal tariff rate
3. Any additional sector-specific tariffs (such as the 25% on automobiles)

Who gets hit hardest?

The newly released tariff schedule reveals significant variations in how different countries will be affected:

Highest tariff rates:

• Cambodia: 49%
• Laos: 48%
• Madagascar: 47%
• Vietnam: 46%
• Myanmar: 44%

Major trading partners:

• China: 34% (on top of existing 20% tariffs, creating a combined rate of approximately 54%)
• European Union: 20%
• Japan: 24%
• South Korea: 25%
• India: 26%
• United Kingdom: 10% (significant advantage compared to EU and other major economies)

Lowest tariff rates (10%):

Several countries including Australia, Brazil, Chile, Singapore, United Kingdom, Peru, Dominican Republic, UAE, Argentina, Guatemala, Honduras, Egypt, Saudi Arabia, and El Salvador.

Tariff rate methodology

The White House has published a schedule of country-specific tariff rates. These rates are described as “discounted reciprocal tariffs” that are calculated based on what the administration perceives as barriers to US exports. According to the documentation, these calculations include:

• Official tariff rates
• Value-added tax impacts
• Currency manipulation assessments
• Non-tariff barriers (regulations, standards, etc.)

For example, the EU’s barriers are assessed at 39% in the chart, but the reciprocal tariff is set at 20%. Similarly, China’s barriers are calculated at 67%, while the reciprocal tariff is set at 34%.

It’s worth noting that these calculations and the methodology behind them have been controversial, with many economists and trade experts questioning the equivalence being drawn between different types of trade measures.

Important exemptions

Not all imports will face these new reciprocal tariffs. Exempt categories include:

• Articles covered under 50 USC 1702(b)
• Steel/aluminium articles already subject to Section 232 tariffs
• Autos already under Section 232 tariffs
• Copper, pharmaceuticals, semiconductors, and lumber
• Bullion (gold, silver, etc.)
• Energy products and minerals not available in the US

Special cases: Canada and Mexico

The administration’s approach to USMCA partners is more complex:

• Existing fentanyl/migration-related tariffs remain in effect
• USMCA-compliant goods continue to enjoy 0% tariffs
• Non-compliant goods face a 25% tariff (10% for energy and potash)
• If existing orders are terminated, non-compliant goods would face a 12% tariff

What happens next?

The executive order includes provisions for both escalation and de-escalation:

• Tariffs could increase if countries retaliate against US exports
• Tariffs could decrease if countries “take significant steps to remedy non-reciprocal trade arrangements”

Most trade experts anticipate retaliatory measures from affected countries. The EU has already indicated it is preparing countermeasures, and China is likely to respond with tariffs of its own. UK Prime Minister Keir Starmer has acknowledged that “clearly there will be an economic impact” from the 10% tariff on the UK, but promises to respond with “cool and calm heads.”

These reciprocal responses could potentially escalate trade tensions and create additional uncertainty for global supply chains in the coming months.

The critical role of country of origin

It’s essential to understand that these tariffs are applied based on the country of origin of the goods, not the country of export. This is a crucial distinction for UK companies:

• UK origin goods: Will face the 10% reciprocal tariff rate (plus any applicable MFN duties)
• Re-exported Goods: Products manufactured in other countries but shipped through the UK will be subject to the tariff rate of their country of origin

For example:

• A product manufactured in the UK and exported to the US will face a 10% tariff (plus any existing MFN duties)
• A product manufactured in China but exported from the UK will face the 34% Chinese tariff rate (this 34% comes on top of the existing 20% tariffs already imposed on Chinese goods, meaning Chinese origin goods will effectively face a combined tariff of approximately 54%, plus any applicable MFN duties)
• A product manufactured in the EU but exported from the UK will face the 20% EU tariff rate (plus any existing MFN duties)

This means UK companies dealing with re-exports or products with components from multiple countries need to pay careful attention to origin rules and documentation.

Implications for UK businesses

While the new 10% tariff will create challenges for all exporters to the US market, UK businesses face a relatively lower barrier compared to competitors from the EU (20%), China (34%), and many other economies. This differential could potentially:

1. Position UK-origin goods more favorably against competitors from higher-tariff countries
2. Present UK as a more attractive manufacturing location for companies seeking US market access
3. Create opportunities for UK companies in US supply chains where they can offer a tariff advantage over suppliers from higher-rate countries

It’s important to note that a 10% tariff still represents a significant cost increase that UK exporters will need to manage carefully through pricing strategies, efficiency improvements, or absorbing margin impacts.

For UK companies importing materials or components from other countries for products ultimately bound for the US market, careful supply chain planning becomes even more critical, as the origin of inputs could significantly impact final tariff rates.

Business impact: What to expect

Companies involved in international trade should be preparing for:

1. Price adjustments: Imported goods will likely become more expensive, potentially driving inflation in certain sectors.
2. Supply chain shifts: Businesses may accelerate plans to diversify suppliers or “re-shore” production to the US.
3. Inventory management: The short implementation timeline means companies have little time to adjust ordering patterns.
4. Compliance complexity: The varying rates and exemptions create a more complex compliance environment.
5. Potential retaliation: Other countries may respond with their own tariffs or other measures targeting US exports.

The bigger picture

This move represents a fundamental shift in US trade policy philosophy. While previous administrations generally worked within the multilateral system established through the WTO, the Trump administration is taking a more unilateral approach, essentially using America’s market power as leverage in trade negotiations.

Supporters argue this will finally address long-standing imbalances and bring manufacturing jobs back to America. Critics worry about inflationary impacts, retaliation from trading partners, and potential disruption to global supply chains.

What’s certain is that global trade is entering a new and less predictable era. For businesses engaged in international commerce, adaptability will be key as this new policy takes effect and trading partners determine their responses.

Documentation requirements and compliance

With country of origin being the determining factor for tariff rates, proper documentation becomes critical:

1. Certificate of origin: Ensure these are accurate and properly prepared for all shipments
2. Substantial transformation: Be aware of rules that determine when processing in the UK is sufficient to confer UK origin
3. Component tracking: For complex products, maintain clear records of where components originate
4. Customs compliance: US Customs and Border Protection will likely scrutinise shipments to verify claimed origin

Key takeaways for UK exporters

1. The 10% tariff rate for UK goods is lower than rates applied to EU (20%), China (34%) and many other exporting countries
2. Proper documentation of UK origin will be essential to benefit from the lower rate
3. Supply chain planning should consider the tariff implications of sourcing components from different countries
4. Be prepared for the initial implementation on April 5, 2025, and the full country-specific rates starting April 9, 2025
5. Monitor for any potential modifications to the tariff rates based on trade negotiations or retaliatory measures

As stated in the White House fact sheet, these tariffs will remain in effect until “President Trump determines that the threat posed by the trade deficit and underlying nonreciprocal treatment is satisfied, resolved, or mitigated.” The document also notes that the President has authority to “decrease the tariffs if trading partners take significant steps to remedy non-reciprocal trade arrangements and align with the United States on economic and national security matters.”

This blog post is based on information from the “Fact Sheet: President Donald J. Trump Declares National Emergency to Increase our Competitive Edge, Protect our Sovereignty, and Strengthen our National and Economic Security” released by the White House on April 2, 2025, and will be updated as developments occur.

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