The UK Government has announced its new most favoured nation tariff regime. The UK Global Tariff (UKGT) will replace the EU’s Common External Tariff for trade with the UK from the end of the post-Brexit transition period (currently scheduled to end on 31 December 2020).

This new regime is quite different to the pre-Boris Johnson UK temporary tariff regime for no deal (March 2019), which would have removed all tariffs on 87% of UK imports (by value). By contrast 60% of UK imports will be tariff free under the UKGT.

The UKGT is said to back business by maintaining some tariffs to protect industries (agriculture, cars and ceramics) where the UK is a significant producer, while cutting tariffs on many basic components of production (copper alloy tubes, screws, bolts etc.). It is also said to benefit consumers and households by removing tariffs on consumer goods (e.g. dishwashers, sanitary products, paints and mirrors) and products that will promote a sustainable economy (e.g. thermostats and bike inner tubes).

An overarching message from the DIT is that the UK is cutting red tape. There will be no tariffs at all on many products and there won't be a wide range of different tariffs on commodities that are only slightly different. Where there are tariffs, they will be rounded down to standardised percentages.

Much of the change is based on removing “nuisance tariffs” (generally defined as tariffs so low they cost governments more to collect than the revenue generated or, less commonly, tariffs without protective effects, but still collected because they generate revenue). Interestingly, the DIT’s announcement defines nuisance tariffs as those below 2%, but, the public consultation on the UKGT (published in February 2020) defined them as being below 2.5% and some countries and economists use figures as high as 5%.

The UK Government is presenting the UK as being open for global business. The cutting of tariff-related barriers to trade may go some way to balance the potential increase in non-tariff barriers in EU supply chains when the transition period ends. The UKGT may also assist ongoing trade negotiations (e.g. with the USA and Japan), by clarifying the default position if a free trade agreement is not reached. Given the deadlocked state of the UK-EU future relationship negotiations, those new trade links are likely to be an increasing focus