Donald Trump’s tariffs: what’s happening and what could it mean for the UK?
Soon after taking office on 20 January 2025, US President Donald Trump announced plans to introduce wide-ranging tariffs on goods imported into the US, including from the UK.
The US imports more goods than it exports, meaning it has an overall trade deficit. Some of its biggest trade deficits in goods are with China, the European Union, Mexico and Vietnam. The tariffs were part of a wider plan aimed at “restoring fairness in US trade relationships”, and began with the imposition of charges on goods from China, Canada and Mexico, which were imposed in early February (though the tariffs on Canada and Mexico did not take effect until March).
On 12 March 25% tariffs on all global steel and aluminum imports came into force. Tariffs on imported vehicles were then announced on 26 March and came into effect on 2 April.
On 2 April—dubbed “Liberation Day” by the Trump administration— baseline tariffs of 10% were announced for more than 50 countries, including the UK, with higher individual rates of up to 50% for several other countries. While the baseline 10% rate took effect on 5 April, the higher rates, which were due to take effect on 9 April, were ultimately paused for 90 days following a week of havoc for global financial markets.
The pause was later further extended, with these higher rate tariffs now due to be implemented on 7 August. In May the UK became the first country to strike a deal to reduce the impact of US tariffs. Other countries, along with the European Union, have since struck their own deals.
This explainer looks at what tariffs are, why they were introduced by the US and what it all means for the UK. It was last updated at 12pm on Thursday 7 August and the information below is correct as of then.
With developments unfolding rapidly, we’ll continue to update this article as new information becomes available. If you’ve seen something we should add, spotted a claim for us to fact check or have a question you’d like us to answer, please let us know here.
What are tariffs?
Import tariffs are a form of taxes charged on goods imported from other countries.
They can be levied in various different ways, such as by the number, weight or volume of items, but the tariffs announced by Mr Trump were mostly ad valorem tariffs, meaning the amount due is calculated as a percentage of the value of the product.
A 10% tariff means an item costing $10 would attract an additional charge of $1.
In addition to being the world’s largest economy, the US is also the leading global importer, pulling in $3.4 trillion worth of goods in 2024. So increasing the cost of selling to the US has the potential to significantly impact the global economy.
Previously, the average effective tariff rate on goods imported to the US was around 2.2%.
Why has the US raised tariffs?
Raising tariffs can be a way of protecting domestic industries, as they make it more expensive to purchase goods manufactured abroad. This prevents local manufacturers from being undercut by imports.
For example, in 2024 the EU imposed duties of between 17% and 35.3% on Chinese-manufactured electric vehicles, amid concerns that European car manufacturers were unable to compete with what the EU described as their “unfairly subsidised” Chinese counterparts.
Tariffs can also encourage domestic investment. Companies who open factories in the US rather than overseas can avoid paying any tariffs on the products they manufacture. Companies including Apple, Johnson & Johnson and Honda are among those to announce plans to increase investment in the US, which observers have suggested may be at least partly in order to avoid goods being subject to tariffs.
However, Mr Trump also raised concerns over national security as justification for his actions. The White House described the introduction of tariffs on China, Mexico and Canada as “using our leverage to ensure Americans’ safety”—with the stated aim of encouraging its neighbours to reduce illegal immigration over the US border, and to encourage China to clamp down on the flow of precursor drugs used to manufacture fentanyl.
The US Department of Commerce had also reported that imports of steel, aluminium, cars and car parts threatened to “impair national security”, allowing the President to implement tariffs under section 232 of the 1962 Trade Expansion Act.
Who pays tariffs?
Donald Trump has repeatedly suggested that tariffs are paid by foreign countries. During his inauguration speech, for example, he said: “Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens.”
However, it is actually companies importing the goods into the US that pay the levy. These companies have the option of absorbing these additional costs and taking lower profits but the evidence suggests they are choosing instead to raise their prices and pass on these additional costs to American consumers.
Peter Levell, deputy research director at the Institute for Fiscal Studies (IFS), said the evidence from tariff increases under the last Trump administration was that the cost was “almost entirely passed on to domestic consumers”, along with importers.
Speaking in a video interview for the IFS website, he said: “It wasn’t a reduction in the prices that foreigners were charging to enter the US market—it was an increase, almost one for one with the tariff rate, for domestic consumers.”
According to a recent report by the Budget Lab at Yale, an independent research institute analysing US financial policies, Mr Trump’s tariffs have been responsible for a 1.8% rise in prices for American consumers, increasing costs for the average household by $2,400 in 2025.
What has been the impact of tariffs on the UK?
The UK originally faced tariffs of 25% on all aluminium, steel and derivative goods imports, with the same rate set to be applied to passenger vehicles and light trucks along with car parts. On 5 April, a 10% baseline tariff was introduced on most goods sent from the UK to the US.
While some countries responded by imposing retaliatory tariffs of their own, the UK did not, instead pinning hopes on finalising a trade deal that would reduce their impact.
A deal was expected, because unlike many of the countries hit by tariffs, the level of trade between the UK and the US is more or less even. Government figures show that in 2024, the UK exported £59.3 billion of goods to the US and imported £57.1 billion.
Striking a deal was of particular importance to the UK steel industry, which had previously been hit by US tariffs during Mr Trump’s first term as president, when 25% tariffs for steel and aluminium imports were introduced. At the time the move was described by trade body UK Steel as a “hammer blow”.
In March 2022, under President Joe Biden’s administration, the 25% tariff was replaced by a new arrangement which allowed UK companies to export up to 500,000 tonnes of steel and 21,600 tonnes of aluminium to the US tariff-free.
According to UK Steel in 2024 the UK exported 180,000 tonnes of semi-finished and finished steel to the US, worth £370 million, accounting for 7% of the UK’s total steel exports by volume and 9% by value.
Responding to the announcement of the new 25% tariff on steel and aluminium imports, which has been in force since 12 March, UK Steel director general Gareth Stace said: “President Trump has taken a sledgehammer to free trade with huge ramifications for the steel sector in the UK and across the world. This will not only hinder UK exports to the US, but it will also have hugely distortive effects on international trade flows, adding further import pressure to our own market.”
Mr Stace had previously warned that returning to the 25% tariff would threaten more than £400 million worth of exports.
Economic prosperity deal
The general terms of the UK-US economic prosperity deal (EPD) were announced on 8 May. It is not a free trade deal nor a legally binding agreement but instead provides the terms for future negotiations. At present the agreement covers only a few select industries, including agriculture, steel and car making. The deal does not alter the 10% baseline tariff that the US has applied worldwide, meaning UK goods imported by the US are still subject to this rate.
On 4 June the US doubled its import tariffs on steel and aluminium to 50%, but the UK was given a temporary exemption due to the existence of the EPD, despite the fact it had not been formalised. As a result, tariffs for UK steel and aluminium remain at 25%.
The deal does not provide a proposed date by which negotiations are expected to be completed. Liam Byrne MP, chair of the Business and Trade Committee, has requested the government provide a timeline.
It’s been reported that further negotiations are stalling, in part due to the US insisting on maintaining the ‘melt and pour’ rules, which state that only steel melted and poured in the same country can be considered as originating from that country.
This is an issue because some UK steel manufacturers source some of their steel from India and the Netherlands. This means it fails to qualify under the melt and pour rules, which in turn means it does not qualify for a discounted tariff rate.
Failure to reach a deal on this point could be seen as the UK failing to comply with the terms of the EPD. In this case, a Presidential Proclamation makes it clear that the US will raise these tariffs to 50%.
A further executive order, signed on 16 June, implemented some of the terms of the EPD, establishing a 10% tariff for UK-manufactured cars exported to the US up to a quota of 100,000 vehicles. The tariff on UK-manufactured car parts was also reduced from 25% to 10%.
The quota is roughly in line with the current number of vehicles exported from the UK to the US each year, but any vehicles which exceed this number will be subject to a tariff of 27.5% (25% plus the existing 2.5% rate), according to the Society of Motor Manufacturers.
Trade experts say the lack of predictability of the general terms of the EPD, along with the non-binding nature of the agreement, is causing uncertainty among businesses.
The deal is not without controversy. The UK has reduced its own tariff on US imports of ethanol—a type of alcohol that is increasingly being used as a biofuel to help reduce carbon emissions—from 19% to zero.
The US will now be able to export up to 1.4 billion litres of ethanol to the UK market duty-free, meaning it is likely to be able to undercut domestic ethanol. This has led to warnings that UK plants producing the fuel may have to close.