Insight: UK’s ‘no-deal’ tariff cuts add to confusion Pt. 2

As reported yesterday, the UK government’s release of a list of zeroed or reduced metals import tariffs if “no-deal Brexit” takes place received negative or minimal reaction from the UK automotive and steel sectors.

A major concern was heightened confusion in sectors already grappling with many uncertainties about how and when the UK will leave the European Union.

Automakers — major users of steel and aluminum – were perhaps the most vociferous in opposition to the ‘no-deal’ measures, as were trade union sources. Japanese trade officials focused on the situation of Japanese automakers in the UK.

Mike Hawes, chief executive of UK automotive industry association SMMT said: “[The] announcement does not resolve the devastating effect a no-deal Brexit would have on the automotive industry. No policy on tariffs can come close to compensating for the disruption, cost and job losses that would result from no-deal. It’s staggering that we are in this position with only days until we are due to leave. Every day no-deal remains a possibility is another day companies pay the price in expensive contingency measures.”

Britain and Ireland’s largest union, Unite, said in a statement that government plans to slash tariffs to zero on key sectors such as steel in the event of a no-deal Brexit “would be an act of economic vandalism…threatening jobs and livelihoods. The UK’s steel industry has been pushed to the brink because of the dumping of cheap Chinese steel,” the union said.

One European trader questioned whether the tariffs move would lead to unfair competition.

“The information provided is the bare minimum needed to mitigate the full impact of no-deal, it has come far too late to allow businesses to be ready in just a few short weeks,” said Allie Renison, the Institute of Directors’ Head of Europe and Trade.

Japanese reaction
Japan’s foreign minister Taro Kono highlighted the impact of Brexit uncertainties on Japanese automakers in the UK in a press conference in Tokyo Tuesday — before rejection of UK Prime Minister Theresa May’s Brexit deal in parliament.

“The impact of Brexit without deals is major. Through official meetings and private meetings with the UK foreign minister, we have advised on the need for visibility and transparency [on post Brexit UK], repeatedly,” the Japanese minister said.

Japanese automakers Nissan Motor and Honda Motor have decided to curtail operations in the UK. “Japanese companies are making choices to avoid risks. And this will not bring positive results to the communities that have accepted the Japanese establishment,” Kono said.

Kono said that typically, trade disputes would be resolved through bilateral negotiations, or be settled on the basis of World Trade Organization rules after the UK’s withdrawal from the EU.

According to the no-deal Brexit list, tariffs on imports of base metals, excluding aluminum, will be reduced to 0% from 1.8%. Aluminum will be cut from 6.3% to 0%, with steel and iron dropping from 0.8% to 0%.

— Annalisa Villa, Diana Kinch, Ben Kilbey and Mayumi Watanabe