[co-authors: Isabel Fincham, Lydia Rogers]
On Wednesday 2 April 2025, US President Donald Trump signed an Executive Order declaring a national emergency “arising from conditions reflected in large and persistent annual US goods trade deficits.” In response, the President announced the implementation of a new set of tariffs on all goods imported into the US. These tariffs consist of:
- A 10% baseline tariff on all imports into the US, which will come into effect on 5 April.
- Higher reciprocal tariffs on 60 trading partners with which the US has determined it has the largest trade deficits. The tariff rates levied on each jurisdiction vary, with the European Union subject to a 20% tariff on all goods and China an additional 34%. Countries in south-east Asia face some of the highest rates – including 46% for Vietnam, 49% for Cambodia, 36% for Thailand, and 24% for Japanese goods. These higher reciprocal tariffs are set to apply from 9 April.
The tariffs do not apply to US neighbours Canada and Mexico, who will continue to be subject to tariffs set out under previous Executive Orders in February and March, as discussed in our earlier client alert.
In addition, the President confirmed that previously announced 25% tariffs on all global car and truck imports came into effect on 3 April. They will be joined by a 25% levy on automobile parts from 3 May – covering up to USD460 billion worth of vehicle and automobile parts imports into the US annually (Reuters).
These cars and car parts will be spared the reciprocal tariffs announced above. Other goods currently exempted from the reciprocal tariffs include bullion, energy and minerals not found in the US, as well as semiconductors, pharmaceuticals, copper, and lumber.
Response from the European Union
In just a few months, the EU-US trade relationship has changed significantly, including in response to the so-called US “Liberation Day” tariff announcements.
European Commission President Von der Leyen outlined the EU’s approach to respond to the imposition of tariffs, which consists of the adoption of two sets of countermeasures. Furthermore, Von der Leyen indicated that the EU will also closely monitor the potential indirect consequences of the tariffs, including potential dumping of goods from third countries as a consequence of disruption of trade with the US. She also stressed the EU’s openness to negotiate with Washington – reiterating Trade Commissioner Šefčovič’s comments.
EU response to tariffs on steel and aluminium
As a response to the imposition of tariffs on European steel, the EU intends to adopt a set of countermeasures worth EUR26 billion.
First, it will lift the suspension on the additional tariffs on products included in Implementing Regulations 2018/886 and 2020/502. These tariffs were originally adopted during President Trump’s first presidency as a response to the US steel and aluminium tariffs. These EU countermeasures were suspended in 2021. The additional 25% customs duty will hit key US exports, such as motorcycles, jeans, whisky, and tobacco/cigars. The suspension was first expected to be lifted on 1 April, but it has been delayed until mid-April in order to coincide with the set of brand-new countermeasures.
Additionally, the EU has announced it will adopt new countermeasures on additional US imports by mid-April. A list of potential products was published last month, featuring a 99-page list of goods that range from meat, poultry, fruit and vegetables, and alcoholic beverages – but also workshop tools, household appliances, plant machinery, additional types of motorcycles, pouches and vapes, contact lenses, and optical fibres, among others. Following the publication of the list, the European Commission launched a public consultation to gather feedback from stakeholders on the impact of the counter-tariffs to be introduced by the EU. Economic operators were asked to mention which good(s) they are concerned with and to highlight which EU economic interest is at stake as a consequence of: (a) US tariffs; and/or (b) EU’s proposed counter-tariffs. The public consultation closed on 26 March.
Based on the feedback received, the European Commission is currently preparing a draft implementing act containing the measures under Regulation (EU) 654/2014 (Enforcement Regulation) and consulting Member States under the comitology procedure. The draft can pass subject obtaining approval by a qualified majority (but, if the qualified majority is against it, Commission must withdraw the act). If there is no qualified majority either for or against the act, the Commission may adopt it or submit an amended draft. The Commission expects that the comitology procedure will be concluded, and the act imposing the countermeasures passed, by mid-April. The measures should then become applicable one month later.
EU response to “Liberation Day”
Following the tariffs announcements of “Liberation Day”, the EU and its Member States will likely retaliate with yet more measures potentially targeting also other sectors of the US economy. In view of the US surplus on services, some of the reported responses that the EU is considering include services and intellectual property rights (eg imposing digital levies on Silicon Valley, regulatory clamps on Wall Street, or taxes on US pharma exports). Other measures could include taxing financial transactions and digital flows, restrictions under the new International Procurement Instrument, or additional fees on US airlines landing in EU airports. On top of additional retaliatory measures, the EU competition chief Ribera has warned of “brave” enforcement of digital regulation (ie, DMA) on US companies.
The final measures will depend on what President Von der Leyen and Trade Commissioner Šefčovič will discuss with the Member States. US tariffs will likely be more impactful on certain Member States (eg France, Germany), which arguably will spearhead the discussions on countermeasures. Yet, not all Member States have the same appetite for retaliation as to avoid potential escalation.
Looking at the European industry’s recent response, it is worth noting that, while some EU producers have urged the European Commission to include certain rival US products to limit competition, some others (such as whisky and alcohol producers) have instead requested to remove spirits from the list in fear of US retaliation. The EU pharmaceutical sector, which had also heavily warned about the possible negative implications of a trade war, has not been directly affected by the Trump Administration’s tariffs so far (following pressure from the American pharmaceutical sector as well).
As for timelines, the European Commission has dismissed France’s claim that measures will be already agreed as of the end of April, stating instead that they would come at “appropriate time”. Trade Commissioner Šefčovič insisted that the EU will respond to tariffs in a calibrated and unified way, carefully balancing the interests at stake and the options available.
Response from the Asia-Pacific
Almost all governments in the APAC region have voiced their strong disapproval and concern about the Trump Administration’s tariff announcements while remaining cautious in announcing strategies for responding.
Governments of Australia, New Zealand, and Malaysia have stated that they do not currently plan to retaliate with their own tariffs. Governments of South Korea, Japan, India, Indonesia, Malaysia, and Thailand described efforts to negotiate new resolutions with the US. In the meantime, governments of multiple Asian countries, including South Korea, India, Thailand, and Cambodia, have urged businesses and the public to remain calm and promised to support affected industries or establish plans in response to the tariffs.
Vietnam’s Prime Minister has ordered the establishment of a task force to address the situation. China, however, has imposed its own countermeasures in response to the US tariffs – of 34% on all US products. At this point, however, the extent of any future countermeasures against the US tariffs or the contours of any bilateral bargains to address US concerns remain unclear.
Response from the United Kingdom
Alongside countries including Singapore and Brazil, the UK is not on the list of the 60 jurisdictions facing the Trump Administration’s reciprocal tariffs – but will nevertheless be subject to the 10% baseline tariffs applied to all imports into the US. The UK’s car industry will also be impacted, with the c. USD10 billion of annual automobile exports from the UK to the US hit by the higher 25% levy (FT).
The US is the biggest buyer of British-made cars, making the automotive sector one of the most exposed to the tariffs. Other sectors hardest hit include the food and drink industry – the US is the largest market for exports of Scotch whisky – and chemicals, the second-largest commodity exported from the UK to the US (ITV).
Prime Minister Sir Keir Starmer set out his response to the Trump Administration’s actions in a speech to UK business leaders in Downing Street on 3 April. The speech indicated that the UK would not be immediately imposing significant retaliatory measures on the US in response, noting that a “trade war” would not be in the UK’s national interest. This arguably makes the UK an outlier among major economies, with the EU, China, and Canada all preparing or implementing retaliatory measures in response.
The UK Government has published an indicative list of goods imported from the US that may be considered as part of future retaliatory measures. The list encompasses around 27% of British imports of US origin goods, while excluding products deemed to be in the wider public interest, such as medical supplies and military equipment.
Negotiating a trade deal
The Prime Minister’s speech also confirmed reports that negotiations are underway on a trade deal with the US – described by Sir Keir Starmer as “an economic prosperity deal, one that strengthens our existing trading relationship” with the US (Prime Minister’s Office). The UK Government may be pinning its hopes on such a deal leading to the removal or reduction of any or all of the US imposed measures – including the 25% tariffs on aluminium and steel imposed in March, the incoming 25% tariffs on cars and parts, and the 10% baseline tariff on all UK goods exported to the US.
Negotiations on this deal appear to be at an advanced stage. In an interview responding to the US tariff announcements, the Business Secretary confirmed that the deal had been agreed with US officials and is currently awaiting sign-off from the President (BBC).
The deal, which the UK has been keen to centre around advanced technology, may include offers from the UK to remove or water down the digital services tax introduced in 2022, or increase access for US companies to the technology corridor between Oxford and Cambridge (FT).
The UK Government has also confirmed that it will maintain rules of origin requirements to prevent tariff circumvention by EU exporters rerouting goods via the UK.
Wider impact on UK industry
Importantly, the agreement of a UK-US trade deal is unlikely to resolve the indirect impacts of the Trump Administration tariffs and any resulting escalation. This could lead to a wave of products being diverted from the US market to the UK, as exporters look for new markets. Depending on the severity of the resulting market distortions, the UK Government and Trade Remedies Authority could consider further trade defence measures to mitigate the impacts of dumping or import surges.
As the wider impacts of these tariffs make themselves known in the coming days and months, affected businesses are encouraged to engage in proactive mitigation planning. In particular, UK-based manufacturers with a presence overseas are encouraged to reassess and adapt their supply chains to this complex landscape. For more details, our article on mitigating tariff dispute sets out a range of supply chain mitigation strategies for your business to consider.
UK launches consultation
Addressing Parliament on 3 April, UK Business Secretary Jonathan Reynolds announced the launch of a consultation with businesses on the commercial impact of any potential retaliatory tariff measures taken by the UK against the US, closing on 1 May.
Affected businesses are encouraged to ensure their views are represented in UK Government trade policy ahead of time.
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