No-deal tariff regime would be ‘sledgehammer’ to UK economy, CBI warns

The new levies, to be imposed from the day after a March 29 Brexit if MPs vote for a no-deal withdrawal, would force up prices on EU imports including cars and many food products.

The unilateral and temporary regime includes levies of 10.6% on European cars and trucks which had previously been free of tariffs, potentially increasing the cost of a typical family hatchback by around £1,500. Car parts would face no extra tariffs to avoid disruption to supply chains.

And it introduces tariffs on EU goods like beef, chicken, lamb, pork and Cheddar-style cheese if MPs vote to leave without a deal.

But tariffs will be slashed on imports from outside the EU, potentially lowering prices on goods from countries like the USA and China, in a move which unions warned would “destroy” jobs in manufacturing sectors like steel.

Meanwhile, the European Commission confirmed that after a no-deal Brexit, the EU will impose tariffs on UK imports equivalent to those on other non-EU countries with no trade agreement, in a move which would result in higher prices for many British exports in European markets.

TUC general secretary Frances O’Grady accused the Government of showing “reckless disregard for people’s jobs”, warning the proposed tariff regime would be “a hammer blow to our manufacturing industries and the communities they support”.

The general secretary of steelworkers’ union Community, Roy Rickhuss, said: “The Government’s plan for zero tariffs would be a fresh betrayal of British steelworkers, putting further pressure on their jobs at a difficult time for the industry.”

In special arrangements for Northern Ireland, the UK’s temporary import tariffs will not apply to EU goods crossing the border from the Republic.

The decision – designed to avoid the need for checkpoints which might revive sectarian tensions – has raised fears of smuggling, as ministers insist there will not be a border down the Irish Sea.

Ministers said that, overall, the changes would represent a “modest liberalisation” of the UK’s tariff regime.

They said that 87% of all imports to the UK by value would be eligible for zero-tariff access – up from 80% at present – while many other goods will be subject to a lower rate than currently applied under EU rules.

But CBI director-general Carolyn Fairbairn told BBC Radio 4’s Today: “What we are hearing is the biggest change in terms of trade this country has faced since the mid-19th century being imposed on this country with no consultation with business, no time to prepare.

“This is no way to run a country.

“What we potentially are going to see is this imposition of new terms of trade at the same time as business is blocked out of its closest trading partner.

“This is a sledgehammer for our economy.”

National Farmers Union president Minette Batters said it was “appalling” that farmers had learnt the tariffs on imported food products just 16 days before a potential no-deal Brexit.

The Government’s approach would not necessarily lead to cheaper food, but would mean the UK loses control of animal welfare standards, warned Ms Batters.

Large reductions in tariffs on non-EU food imports are “worrying” to UK producers and are likely to mean “a greater reliance on food produced overseas”, she said.

Labour’s shadow international trade secretary Barry Gardiner said: “UK companies will now face competition from a flood of cheap imports that undercut them, putting thousands of jobs here at risk.

“The fact that Government has exempted cross border trade with Ireland only opens up a backdoor route for smuggling and risks creating the very divergence of customs regimes between Northern Ireland and the rest of the UK that Parliament has been so determined to avoid.”

Among  imports from EU and non-EU sources which will be subject to tariffs will be:

– Beef, lamb, pork and poultry and some dairy products, in order to protect UK farmers and producers from cheap imports;

– A number of tariffs on finished vehicles to support the automotive sector, which will not apply to car parts imported from the EU to prevent disruption to supply chains;

– Products including certain ceramics, fertiliser and fuel, where tariffs protect UK producers against unfair practices like dumping and state subsidies;

– Goods including bananas, raw cane sugar and certain kinds of fish, where tariffs are used to permit preferential access to the UK market for developing countries.

If the UK leaves the EU without a deal on March 29, the temporary schedules will apply for up to 12 months while a full consultation and review of a permanent approach is undertaken.

Proposed tariff rates on a range of food products were announced as a proportion of the so-called “most favoured nation” (MFN) currently imposed by the EU on imports from countries which do not have a free trade agreement.

Rates include beef (53% of MFN), poultry meat (60%), sheep meat (100%), pig meat (13%), butter (32%), Cheddar-like cheese (13%), protected fish and seafood products (100%) and milled and semi-milled products (83%).

Tariffs on finished cars and trucks will be set at 10.6%, down from the EU MFN rate of 11.3%, while for finished buses the rate will remain unchanged at 12.6%.

Other rates include 0.2% on mineral products, 0.1% on chemical products, 2.1 on fertilisers, 0.1% on plastics and rubber, 0.2% on leather and hides, 0.9% on textiles and textile products, 0.3% on stone and cement, 1.2% on ceramics, 0.2% on glass and 2.9% on transport equipment.

Trade Policy Minister George Hollingbery said: “This balanced approach will help to support British jobs and avoid potential price spikes that would hit the poorest households the hardest.

“It represents a modest liberalisation of tariffs and we will be monitoring the economy closely as well as consulting with businesses to decide what our tariffs should be after this transitional period.”