The UK has not been exempted from President Trump’s latest round of US tariffs, which includes a 25% tax on steel and aluminium. This move will have a direct impact on British exporters.

What’s Affected?

In 2024, the UK exported around £470 million in raw steel and aluminium to the US. But the tariffs don’t stop there. They also apply to products made using these metals — such as machinery, gym equipment, and furniture. When these are included, the total value of UK exports affected rises to about £2.7 billion.

For perspective, the UK exported roughly £58 billion of goods to the US in 2024. So around 5% of that is now facing new trade barriers.

Is a Trade Deal Likely to Help?

The UK government is hoping to secure a free trade agreement with the US that could remove these tariffs. But there’s no clear timeline, and no guarantee that a deal will be reached. In the meantime, affected businesses face higher costs and tougher competition in the US market.

What About Reciprocal Tariffs?

Trump has also floated the idea of introducing reciprocal tariffs. This would mean setting US import taxes at the same level as those other countries apply to American goods. The White House has said it will factor in VAT (Value Added Tax) rates when deciding what level to set.

The UK’s standard VAT rate is 20%. Although VAT applies to both imports and domestic goods, the US sees it as a disadvantage to American exports. That could put the UK at risk of additional tariffs.

Will the UK Retaliate?

So far, the UK hasn’t responded with its own tariffs. But the EU has announced plans to impose tariffs on £22 billion worth of American goods, targeting items with political significance such as bourbon, jeans and motorcycles. The UK may come under pressure to follow suit if it’s seen as falling behind in defending its industries.

Why Is the US Doing This?

Trump has several reasons for pushing tariffs. He argues they’re needed to fix what he sees as unfair trade practices, pointing to the fact that some countries charge higher tariffs on US goods than the US does on theirs.

In 2023, the US’s average external tariff was 3.3%. That compares to 3.8% for the UK, 5% for the EU, and 7.5% for China. Countries like India (17%) and South Korea (13.4%) had even higher rates.

Trump has also claimed that tariffs could be used to replace income tax. This is not realistic. The US brings in about $2 trillion a year from income tax, while total imports are worth around $3 trillion. To match income tax revenue, average tariffs would have to be over 60% — far higher than what’s being proposed.

Another reason cited is to encourage companies to manufacture more in the US and create jobs. However, if tariffs reduce imports significantly, they won’t raise as much revenue — so the two goals don’t fully align.

What Next for the UK?

Businesses that export to the US in affected sectors will face cost increases and competitive challenges. Some may look to pass these costs on to buyers, while others may consider shifting production or targeting different markets.

The UK government is likely to hold off on retaliation for now, hoping that a trade deal can be reached. But if reciprocal tariffs are introduced or if the economic impact grows, that position may change.