UK Won’t Apply Tariffs on Most Goods in a No-Deal Brexit

(Bloomberg) — The UK will avoid imposing tariffs on most imported goods in the event of a no-deal Brexit, though officials said prices of key European Union products including beef, cheese and cars will rise.

The government said Wednesday its “balanced approach” aims to offset a spike in prices that consumers would experience in a no-deal departure as a result of the falling pound and higher costs of imports. But a major UK business lobby described it as a “sledgehammer” for the economy.

The announcement comes after Parliament overwhelmingly rejected Prime Minister Theresa May’s Brexit deal for a second time Tuesday night, and lawmakers are expected to vote Wednesday to rule out leaving the EU without a deal — a scenario the premier herself accepted would cause “damage” to the UK. Revealing the government’s no-deal planning so close to the vote will be seen by many MPs as a strategy to focus minds.

“This is no way to run a country,” Carolyn Fairbairn, director general of the Confederation of British Industry, told the BBC. “What we are potentially going to see is this imposition of new terms of trade at the same time as business is blocked out of its closest trading partner. This is a sledgehammer for our economy.”

The government also said any tariffs won’t apply to goods imported into Northern Ireland from Ireland. There will be a “temporary, unilateral approach” that wouldn’t require checks at the Irish land border.

According to the Temporary Tariff Regime, 87 per cent of goods by value will be eligible for tariff-free access, compared with 80 per cent currently. The remainder, including some meat and dairy, as well as finished cars, will be subject to tariffs to protect domestic industry. The list doesn’t include car parts imported from the European Union.

The UK will also retain existing tariffs in areas including fuel and ceramics as a protection against “unfair global trading practices,” such as dumping.

The rates proposed by the UK would be lower than currently set by the EU in many areas, ranging from 60 per cent of the EU’s most-favoured nation rate for poultry meat to 13 per cent of the rate for cheese and pig meat.

On finished cars and trucks, the UK would apply a 10.6 per cent tariff, compared to the 11.3 per cent the EU charges most-favoured nations.

On textiles, the UK would apply 0.9 per cent, compared to the EU’s 8 per cent. And footwear, on which the EU applies an 8.2 per cent tariff, would be tariff-free into the U.K.