How Trump tariffs mean you could pay more for cars and food ...Middle East

Trump’s demand for Greenland has now evolved into a possible trade clash after the US President threatened tariffs on allies unless a deal was agree for the country.

Donald Trump has said the US will impose a new 10 per cent tariff on all goods imported from the UK, Denmark, Norway, Sweden, France, Germany, the Netherlands and Finland from 1 February, rising to 25 per cent from 1 June, raising fears for the consequences for UK companies and households.  

The levy would apply to most goods entering the US, sitting alongside – rather than replacing – existing sector-specific tariffs on metals, vehicles and other products.

Sir Keir Starmer has said the Government will pursue the matter directly with the White House, arguing that tariffs on Nato allies for supporting Greenland are “completely wrong”. 

While the tax would be paid by companies importing goods into the US, it is generally expected that the wider disruption – including retaliation, supply-chain delays and higher input costs – could feed through into prices faced by UK consumers. As per Government figures, the US is one of the UK’s largest trading partners and accounts for 16.8 per cent of goods exports and 17.8 per cent of all trade.

Food and drink

The new 10 per cent US tariff applies to most UK food exports, on products such as cheese and salmon, which could be passed on to consumers through higher prices. However, a more significant impact could arise from further retaliatory tariffs on specific products.

Under the 2025 Economic Prosperity Deal, the UK removed a 20 per cent tariff on US beef. That agreement could be suspended if the trade dispute escalates. If so, the tariff would return, increasing the cost of imported American beef, with higher import costs likely to be reflected in prices.

Alcohol has also been targeted in previous trade disputes. While no decision has been announced, whiskey and bourbon have previously faced retaliatory tariffs, and it is assumed similar products would be considered again if tensions increase.

There are also indirect pressures. The US imposed global tariffs on aluminium and steel in March, initially set at 25 per cent and later raised to 50 per cent, before extending the measures in August to cover hundreds of additional products containing those metals.

Because aluminium is widely used in food and drink packaging, higher global prices for the metal can increase production costs even where food is produced in the UK.

The impact is set to be minimal, however. Thomas Pugh, UK economist at RSM, said that if the US tariffs go ahead, “there would be no need for manufacturers to increase prices in the UK and Europe, and there should be no impact on consumers here”.

He said it was more likely that “US consumers would have to pay higher prices” for goods than those in the UK. Pugh did warn, however, that any retaliatory tariffs or anti-coercion legislation would have a much bigger impact on the UK and EU economies.

Technology

Technology prices are more affected by potential future tariffs than by the 10 per cent baseline measure.

The US government is investigating tariffs on semiconductors, with President Trump stating that duties of up to 100 per cent may be imposed. Semiconductors are a core component in smartphones, laptops, smart home devices and many other consumer products.

Even where devices are assembled outside the US, chips designed or manufactured there are a key input. It is generally assumed that higher costs at that stage would be passed through supply chains over time, rather than appearing as sudden price rises.

Separately, the removal of the US $800 threshold for commercial imports means low-value parcels are now subject to tariffs and customs processing.

Shipping companies have introduced flat fees to handle the additional paperwork, and these higher logistics costs are increasingly reflected in delivery charges faced by UK shoppers buying from international websites.

Cars

The automotive sector is one of the most exposed areas of the UK economy and accounted fir 15.8 of all goods exports to the US, according to government data.

From April, the US introduced a 25 per cent tariff on passenger vehicles and light trucks, followed by a 25 per cent tariff on automotive parts in May. These measures apply separately from the 10 per cent baseline tariff, which does not cover goods already subject to higher duties.

Around one in eight cars built in the UK is sold to the US. With tariffs reducing profitability on those exports, it is often assumed that manufacturers will look to offset losses elsewhere. One option is higher prices in domestic markets, meaning UK buyers could pay more for cars built in the UK even if those vehicles are not exported.

Supply-chain disruption is also a factor. Tariffs on parts have already caused delays and rerouting, which can make specialised components harder and more expensive to source. That can increase the cost of servicing, repairs and MOT work over time.

Steel

A 25 per cent tariff on steel and aluminium imports was introduced in March, increased to 50 per cent in June, and expanded in August to cover a much wider range of goods containing those metals. From July, a separate 50 per cent tariff was also applied to copper and copper-based products.

Only the metal content of each product is taxed, but exporters must now calculate and declare precisely how much steel or aluminium is used, which has reportedly caused delays for some exporters.

Higher metal prices feed into a wide range of consumer goods, from household appliances to furniture and construction materials.

For consumers, the effect is usually indirect and gradual, showing up as higher prices over time rather than immediate jumps.

Pharmaceuticals

Pharmaceuticals are currently exempt from the 10 per cent baseline tariff if products are not available in the US, but the sector remains under scrutiny. The sector is also the largest export market to America, accounting for £11.1bn (17.4 per cent of all goods).

President Trump has previously said tariffs of up to 100 per cent could be imposed on pharmaceuticals unless production is moved to the US. No such measures have yet been introduced, but the possibility is being factored into industry planning.

If tariffs were applied and met with retaliation, it is assumed that costs for some privately purchased medicines, branded treatments and specialist health products could rise.

NHS procurement would be partly insulated through existing contracts, but not all products fall under those arrangements.

Mortgages

The largest potential impact for many households may be indirect.

Higher tariffs tend to raise costs across the economy, from food and manufactured goods to transport and construction.

If those pressures persist, inflation could remain above the Bank of England’s 2 per cent target for longer. It is generally expected that sustained inflation would make the Bank more cautious about cutting interest rates.

For households with mortgages, that could mean monthly repayments staying higher than they would have been in a lower-tariff environment. A retaliatory tariff scheme could risk a trade war meaning a spike in inflation or interest rates.

Marco Forgione, director general of the Chartered Institute of Export & International Trade, said: “The implication is that it is a cumulative tariff so one that is on top of the existing tariffs. This means that UK products sold into US market will be more expensive.

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“UK businesses could decide to absorb some of the cost increases so their products remain competitive in the US market but much of that has happened already [due to existing tariffs].

“It means other producers selling in the US market will be able to reduce costs more which will make UK businesses less attractive.

“Automotive, pharmaceuticals, aerospace, machinery, technology, food and drink are all industries that could be affected.

“How quickly it impacts consumers depends on stock already in the marketplace but the impact of these sort of announcements are pretty quick on consumers.”

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