“Today’s tariff announcements show that no-one wins from a no-deal outcome. Rather than picking winners and losers, or trading off consumers against producers, we need the Government and the EU to focus on a Brexit deal. The tariffs and red-tape that we will face in a no-deal are a double whammy which threaten manufacturing jobs across the UK.
“Some sectors will be dealt an especially hard blow at a time when others are imposing tariffs on us but we are dropping ours. In particular, the automotive sector which is one of the jewels in the crown of high value manufacturing faces being severely impacted by these plans. This will prove devastating for jobs and growth in the companies and regions who depend on its success.”
Background
Leaving without a deal also means that tariffs will be imposed on goods travelling between the UK and the EU. Today the Government has set out the tariffs applying to goods coming into the UK. The Government’s presumption is to minimise the impact on consumers by avoiding or minimising tariffs, but it has recognised the need to protect manufacturers in a few vulnerable sectors (such as ceramics).
Because of WTO rules, the Government is obliged to offer the same tariff rate for imports wherever they come from in the world in a no-deal Brexit, under the so-called ‘most favoured nation’ principle (MFN), whereas at the moment EU goods get preferential treatment. This means a choice between lowering or reducing tariffs on all imports (keeping consumer prices low but exposing UK producers to potentially unfair competition from elsewhere in the world) or imposing tariffs on EU imports (helping producers but potentially putting up consumer prices in the UK).
In a no-deal, the EU is obliged under WTO rules to impose its Common External Tariff on goods entering from the UK. This imposes heavy costs on sectors such as automotive (10%), chemicals (around 5%) and agriculture (up to 200%). The average tariff is 5.3%.