Navigating the legal implications of Trump's tariff policies: a UK perspective

*Correct as of 11 April 2025*

On 2 April 2025, President Donald Trump announced sweeping tariffs on imports from all of the United States' trading partners, including the UK. This move, dubbed "Liberation Day," introduced a 10% baseline tariff on all UK goods entering the US, with higher rates for a vast array of countries, including significantly China as well as the EU. However, on 9 April 2025, Trump announced a 90-day pause on these country-specific tariffs, with the exception of China. In this article, we explore the legal aspects of these trade developments for UK businesses and the steps they could consider in response.

Immediate impact on UK imports

The introduction of a 10% tariff on all UK goods entering the US represents a significant change in trade dynamics. While the higher tariffs on EU goods have been paused for 90 days, the baseline rate of 10% remains in effect for those imports. 

Note that in addition to the 10% import duties for US imports from the UK and the EU, there is also a 25% US duty on imports of steel, aluminium, and cars (with automotive parts to be added on 2 May).

UK businesses must now navigate these changes carefully, understanding that certain current exceptions to US tariffs, such as pharmaceuticals, copper and lumber, are under US investigation which indicates they may be subject to US import tariffs in the future.

Legal considerations for UK businesses

1. Contractual obligations and tariff clauses

Identify contractual liability for tariffs: a well drafted contract should identify (such as by using Incoterms) who is responsible for import and export duties:

• Under all Incoterms except DDP (Delivered Duty Paid) (Incoterms 2020) the buyer is liable for import duties
• Under DDP (Delivered Duty Paid) (Incoterms 2020) the seller is responsible for import duties
• Under all Incoterms 2020 except EXW (Ex Works) (Incoterms 2020) the seller is liable for export duties
• Under EXW (Ex Works) (Incoterms 2020) the buyer is liable for export duties (and import duties)

To learn more about Incoterms, you can listen to our podcast, 'What are Incoterms?' and read our article, 'ICC Incoterms® 2020 has arrived - Key changes and how to prepare for the rules coming into force'.

Price adjustment mechanisms: consider including clauses that allow for price adjustments in response to tariff changes (or a change in law). This ensures that businesses can renegotiate terms if tariffs significantly impact costs.

Force majeure clauses: increases in tariffs are unlikely to qualify as a force majeure event under English law. It will depend on the detail of the contract. Businesses should review their contracts to check whether force majeure is relevant.

Material adverse effect clauses: these clauses, more common in European agreements, may provide grounds for renegotiation if tariffs significantly impact business operations.

Currency: the introduction of tariffs is impacting currencies. Check contracts for what currency is specified and the impact of a change in exchange rate.

Term/termination: check contracts for how long parties are locked in for and whether they can be terminated early.

Contracts where materials are sourced in China for goods that delivered to the US should take priority as they are highest risk.

2. Supply chain management

Origin of goods: understanding the origin of goods is crucial for benefiting from tariff-free trade agreements. Businesses must conduct thorough analyses to determine whether their goods qualify as originating from the UK and so benefit from preferential tariffs under applicable free trade agreements This involves understanding the commodity codes of goods, the origin of various components, and the processes undertaken in the UK.

Consider ensuring supply chain contracts require the supplier to confirm and demonstrate the origin of goods and their components backed up by audit rights.

Customs compliance: ensuring accurate customs documentation is vital to avoid penalties and unexpected tariffs. With higher tariffs, the impact of getting a customs declaration form wrong is now much higher. Businesses should review their agreements with customs agents and logistics providers to clarify responsibilities. The responsibility for customs compliance ultimately lies with the exporter, even if the task is outsourced to a customs agent.

Strategic responses to tariff changes

1. Engagement with government consultations

The UK Government recently launched a consultation on potential tariffs on US goods entering the UK – for more details on this, read our recent insight. Businesses should actively participate in this consultation to influence decisions that may affect their operations. The government is seeking views from businesses on a wide range of imports, and it is crucial for businesses to voice their concerns and suggestions.

2. Exploring alternative markets

With the uncertainty surrounding US tariffs, UK businesses should consider diversifying their markets. Agreements such as the Comprehensive Economic and Trade Agreement (CETA) with Canada offers opportunities for tariff-free trade, and aligning regulatory standards with the EU (and the UK parallel roll over agreement – see below) can facilitate smoother trade relations. The UK is also exploring economic deals that focus on cooperation in areas like AI and technology.

3. Monitoring export controls

Export controls, particularly on critical minerals, are becoming more stringent. Businesses must stay informed about changes in export regulations to ensure compliance and avoid disruptions in their supply chains. Export controls are not limited to trade sanctions and apply globally, affecting businesses with complex supply chains that touch upon countries like China.

Long-term implications and opportunities

The 90-day pause on country-specific tariffs provides a window for potential trade negotiations. However, the complexity of these negotiations, especially for members of the World Trade Organization (WTO) framework, means that businesses must prepare for a variety of outcomes. The WTO's most-favoured nation principle requires that any tariff concessions offered to one country must be extended to all WTO members, complicating bilateral negotiations.

The UK Government’s preference for economic deals over traditional trade agreements highlights the importance of cooperation in areas like AI and technology. This approach may involve creative and unconventional agreements, as seen in past negotiations where symbolic purchases and promises were used to satisfy trade demands.

The role of the WTO

The relevance of the WTO in the current trade environment is a topic of debate. The US has been critical of the WTO's appellate body and has blocked the appointment of new judges to that body, effectively gridlocking the capacity of the WTO to facilitate settlements of disputes and enforcement of the multi-lateral trade rules. In the light of this stalemate, in 2020 a number of members (including the EU, UK, Canada, Japan and China) established an alternative appeal system, known as The Multi-Party Interim Appeal Arbitration Arrangement (MPIA) effectively to act in the place of the moribund appellate body

The WTO remains a crucial framework for global trade, and businesses must consider its rules and mechanisms when navigating international trade agreements.

Potential risks and compliance issues

1. Corruption risks

Higher tariffs will heighten the risk of corruption. Businesses must be vigilant against practices such as bribing customs officials or falsifying certificates of origin. Ensuring robust compliance programs and internal controls is essential to mitigate these risks.

2. Impact on domestic industries

Higher tariffs on imports from certain countries may lead to a surge in imports into other markets, potentially harming domestic industries. The UK Trade Remedies Authority is responsible for investigating and implementing safeguarding measures to protect domestic industries from such impacts. Businesses can approach the authority to request investigations if they believe their industry is adversely affected.

3. Solvency risk

The economic turbulence and rapid introduction of tariffs will increase credit and insolvency risk.  Monitor credit risk and identify key dependencies in the supply chain.

Opportunities for trade diversification

1. CETA and regulatory alignment

The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada, which the UK has rolled over in the Agreement on Trade Continuity between the UK and Canada, potentially offers significant opportunities due to the tariff-free trade it affords and the possibility for alignment of regulatory standards as between the EU, and Canada (and the UK). All of this could further facilitate trade and reduce technical barriers. 

2. Exploring new trade agreements and invigorating old ones

The UK is seeking to reinvigorate and update its trade agreements with countries like Canada, although such negotiations had been put on pause. The introduction of so called 'diagonal cumulation' as between parties to free trade agreements where, for instance Canada would recognise EU inputs into a UK product as UK originating and so subject to tariff free trade, would also be welcome. Post Brexit, the political will was not present to permit this with respect to the EU, but possibly the situation may have changed in the current political and economic climate. 

Business engaging with the UK Government to highlight the benefits of these agreements can help unlock new trade opportunities. Additionally, the UK is exploring potential agreements with other countries, although some, like India, present significant challenges due to their complex economies and regulatory environments.

Navigating tariffs

Navigating the legal landscape of tariffs requires proactive strategies and a thorough understanding of contractual obligations, supply chain dynamics, and regulatory compliance. UK businesses must stay vigilant, engage with government consultations, and explore alternative markets to mitigate the impact of Trump's tariff policies. By doing so, they can position themselves to thrive in an increasingly complex and unpredictable global trade environment.

If you have any questions about this article or tariffs and how they might affect your business, contact David Lowe, Bernardine Adkins or James Stunt. To learn more about this topic, you can also listen to their recent podcast, Navigating tariffs: legal considerations for UK business.