UK businesses wake up to hard truths on tariffs

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U.K. Prime Minister Boris Johnson may have promised a “tariff-free” post-Brexit trade deal at the end of last year, but British businesses are increasingly sounding the alarm over the scale of potential new duties.

Throughout nearly five years of Brexit talks, economists and trade experts repeatedly warned that, even in the best-case scenario, an EU-U.K. accord would only prevent the imposition of tariffs on goods that were predominantly produced in the U.K. Many other goods passing through Britain or distributed from there could face import duties, they warned, but the subject gained only scant attention in mainstream political debate.

In the last couple of days, however, the message has sunk in and a growing number of companies have spoken out over the disturbance that new tariffs could cause for exporters.

“As the commercial impact of the Trade and Co-operation Agreement (TCA) has sunk in for retailers since Christmas Eve, at least 50 of our members face potential tariffs for re-exporting goods to the EU,” said William Bain, trade policy adviser at the British Retail Consortium. 

The problem is largely related to so-called rules of origin. To qualify for zero tariffs, goods must contain a high percentage of parts or value-added that “originates” in the EU or the U.K. The main idea is that a product whose value was largely created in China, for example, cannot simply be re-exported from the U.K. into the EU without a tariff. The percentage of local content for a good to qualify as British will vary according to the product, and British exporters will now have to spend days plowing through the small print of the trade deal to determine where they stand. 

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