The USA Government introduced a tariff of 10% on most goods imported into the USA from the UK. However, the tariff rate depends on the rate relating to where the goods were grown, manufactured, processed or produced.
Goods made elsewhere but shipped from the UK will be subject to the tariff where they are manufactured. E.g. clothing made in China or Vietnam shipped to the UK and then sold to a business in the USA will be subject to the tariffs for China and Vietnam, not the UK. The person paying the additional duty will be the importer into the USA. This depends on the Inco/delivery terms. If UK businesses sell under Delivered Duty Paid (“DDP”) terms they are the importer and liable for the duty. This will make the price to the US customer higher or may mean a reduction in profit if the customer won’t accept a higher price.
For other inco/delivery terms, the purchaser will be liable for the duty and customers may ask for price reductions to compensate for the increased duty payable.
Ultimately, the consumers in the USA will bear the cost, as the duty will be passed on.However, UK businesses selling UK manufactured/ produced products will have an advantage over businesses in other territories due to the more favourable tariff rate for the UK.
Other UK businesses may look at their supply chains to see if it is more cost effective to manufacture in the UK than in other countries if their main market is the USA.
Alternatively, they may decide to manufacture in the USA to avoid the tariffs. US businesses may look to increased trade with the UK if other trading blocks retaliate with increased tariffs on US goods.
Processing in the UK may be attractive for US businesses wishing to trade with the EU, as processing can change the origin of the goods and the UK/EU Trade and Cooperation Agreement could be utilised to reduce the overall duty bill.
Services are not usually subject to tariffs but with the US Government objecting to other taxes such Digital Services Tax, we could see retaliatory taxing of services.
Sales and Use taxes can also apply to goods imported into the USA, but the rates and amounts will be determined by individual states and not by the Federal Government.
The 10% rate does not apply to motor vehicles and steel/aluminium derived products which are subject to a higher 25% tariff rate.
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