Trump’s threatened Mexican tariffs show how vulnerable the UK will be to punitive taxes outside the EU, warns international shipping expert.
The increasing use of border tariffs as a policy weapon will harm international trade and slow shipments, warns the international delivery expert ParcelHero. And, post-Brexit, Britain could be uniquely exposed to their impact.
Says ParcelHero’s Head of Consumer Research, David Jinks MILT: ‘President Trump is threatening to impose new tariffs of 5% - potentially climbing to 25% - on Mexican goods imported into the US unless Mexico stops the alleged flow of immigrants across the border. If this happens the Mexican Standoff between Presidents Trump and Lopez Obrador will not only reduce US-Mexican trade but also impact on all shipments across the US southern border – as US Customs official struggle to cope with the new checks.’
And David cautions the increasing use of tactical tariffs across the world is also a Brexit warning. ‘The increasing threat of punitive tariffs to score political points highlights the extremely vulnerable position the UK could find itself in post-Brexit, should more countries introduce arbitrary tariffs to settle political differences. We’ve already seen the USA, Mexico and China involved in tariff wars. If this trend continues the UK could find itself very vulnerable upon departure from the single market and the protection of the EU’s many trade treaties. Imagine if Argentina were to introduce tariffs on UK goods over the Falklands, for instance. Or if Spain, currently only held in check because we are fellow EU members, decided to impose trade sanctions over Gibraltar, once we are no longer part of the EU single market.’
Says David: ‘Were Britain to leave the UK without keeping its place in the EU Customs Union, we would be potentially exposed to tactical tariffs from non-EU countries, and possibly the EU itself, in the future. Who is to say that a dispute over fishing rights or the amount of money the UK owes the EU might not lead to punitive tariffs in the future? That would push UK products’ prices up significantly inside the EU. And many of the key alternative markets that have been suggested by Brexiteers might well also use tactical tariffs to score political points. We certainly can’t rely on the much-vaunted BRICS nations: China has not been slow to turn its disagreements with the US into a tariff tit-for-tat; India imposes the second highest amount of protectionist measures in the world; Russia third and Brazil fourth.’
And David concludes: ‘Trump might be posing as Britain’s trade ally during his current visit to the UK, but he was very prepared to impose 220% taxes on the Bombardier C series jet, whose wings were produced in Northern Ireland, because he felt it was over-subsidised and posed competition to US-built Boeing products.’
- A typical rise of 30% in costs on an imported item due to:
- An average 5%-9% added to the price of an item in duties (where duties apply, depending on the item)
- Plus VAT of 20% (including shipping & insurance) when buying from countries within the EU – and only reclaimable in you are VAT registered
- Plus increased transport costs – the UK outside the EU would be a less competitive market for international couriers
- Plus ‘customs clearance’ charges from a courier company: typically around £15
- The average SME regular importer/exporter to the EU (excluding ‘one man bands’) will be spending around £163k extra annually, including duties. The UK will face £11bn in new tariffs on imports of £220bn.
- A typical £150 purchase from the EU will now cost around £195, an increase of £45 or over 30%.
- Businesses and consumers will face a mass of new red tape: Customs forms with proof of origin for every shipment arriving in the UK would be required
- SMEs and internet traders will find EU suppliers three times more likely to prefer to trade elsewhere in the EU than with the UK.
- The cost of consumer goods will rise by around 32% if the UK follows the model of countries such as European non-EU member Norway. A typical pair of Levis 501 jeans that costs £56 in the UK costs £71 in Norway and £81 in Switzerland; and a £59 pair of Nike shoes costs £77 in Norway and £88 in Switzerland.
- British exporters seeking to price goods competitively could easily fall foul of the Union’s protectionist anti-dumping rules and face extra duties
- Britain might not qualify for the many favourable trade agreements negotiated by the Union with key countries and markets around the world, including the planned TTIP between the US and EU aimed at removing most customs duties.
- Choosing to set our own tariffs would mean moving outside the EU’s Common External Tariff. That entails setting our own duties on 19,000 individual tariff codes – a move leading to increased border delays and red tape for EU businesses looking to trade with the UK.
For more details of the potential costs and challenges facing the UK’s exporters post a no-deal Brexit see ParcelHero’s report: Revealed – the True Cost of Brexit: https://www.parcelhero.com/blog/news-updates/revealed-the-true-cost-of-brexit