Michael Race
Business Reporter, BBC News
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The concerns are growing, the United Kingdom could be struck by higher American trade taxes after President Donald Trump announced that he would aim for VAT in his latest move.
Trump asked his staff to develop personalized “reciprocal prices” – invoicing the same amount as the samples imposed on American exports – for each country.
The trade relationship of the United Kingdom with us suggested that it would be less exposed to prices than others, but the surprise inclusion of VAT to calculate the potential prices aroused questions about the impact on British companies.
Analysts suggested that prices of 20% or more could be placed on the United Kingdom as well as the European Union.
The British Chambers of Commerce Activity Group (BCC) warned that cars, pharmaceutical products and food and drinks were specific products that could be “considerably struck” by the measures, which were announced on Thursday by the White House.
The Trump administration’s latest announcement was large-scale and threatened reprisals by the United States not only for commercial prices, but for other “unfair or harmful acts, policies or practices”.
One of the justifications that Trump has brought to date to impose prices in countries is whether they have a trade surplus with the United States-that is, they sell more in the United States that they do not import the country.
The use of prices is part of Trump’s efforts to protect American companies and stimulate manufacturing.
The United Kingdom and the United States claim to have trade surpluses with each other due to divergences in the way countries collect data. It remains uncertain if Trump would exempt the United Kingdom from prices, but the introduction of the value added tax (VAT) in the equation complicates the questions.
The president’s last announcement cited VAT as an “unjust, discriminatory or extraterritorial tax”.
VAT tax is the tax that people have to pay when people buy goods or services. The standard rate in the United Kingdom is 20% and it is taken, whether or not it is imported a product abroad.
George Saravelos, World Director of FX Research in Deutsche Bank, said that if the United States has taxed on the basis of existing prices and combined VAT, British companies exporting to the United States could be accused of 21% .
“If reciprocal prices are applied to a VAT base, European countries would be much higher on the list of affected countries,” he said.
William Bain, head of trade policy at the BCC, said that the United Kingdom had a “level of isolation” due to not exporting so many goods in the United States compared to other countries.
But he warned that Trump’s proposals “would create more costs and uncertainty” and to “upset established commercial standards”.
Paul Ashworth, chief economist of the United Kingdom for Capital Economics, said most people consider VAT as a non-discriminatory tax because they apply to all goods, whether they are produced at national or imported level.
But he noted that one of Trump’s advisers arose that, since the United States applied a much lower average sales tax at the state level, VAT was a “form of discriminatory rate “.
Ashworth said that he seemed that the American president now favored prices to be imposed on a “country base” as opposed to his initial idea of introducing a universal tax on all imports in the United States.
‘Difficult to predict’
A price is a tax on imports collected by a government and is paid by the company that imports the property. Countries generally draw up prices in order to protect certain sectors of foreign competition.
But to protect national businesses, consumer prices can increase if a significant company from foreigners transmits higher costs, rather than absorbing or reducing imports.
Caroline Ramsay, partner and head of international trade in the law firm TLT, said that it was “difficult to predict” what the last announcement would mean for the United Kingdom.
She suggested that the word “reciprocal” did not mean what people could have supposed, adding an assessment of the United States on what it considered right.
“This does not mean that the United States will verify what the British price is on paper imports and correspond to this price percentage for paper exports to the United States from the United Kingdom,” she Added.
Mr. Bain argued that it was “vital” that the British government negotiated with Trump and was not “sucked in a trade war of tit-for-tat”.
British government Minister Pat McFadden said the government would wait until reacting.
“The most sensible thing to do with all these announcements is to digest them, to see if they really come true, then decide what you do.”
