Counting the cost of potential trade tariffs

Published 15 March 17

Tariffs could inflate the current cost of some traded dairy products by as much as 50-60%*, if they were imposed between the UK and EU after Brexit. The UK currently enjoys barrier-free trade with other EU member states and has indicated it will be seeking a free-trade agreement with the EU. However, if this cannot be achieved, the introduction of import tariffs is a potential scenario.

Import tariffs are customs duties paid when merchandise is imported. They can be based on a percentage of the product’s value or a fixed charge per unit or weight. The size of the tariff can vary significantly between products and importing nations. The graph below shows the cost added to dairy commodities by applying the EU’s current import tariffs on goods from outside the Union. 

EU import tariffs 

Last year, around £3.5bn worth of dairy produce was traded between the UK and EU, with the UK importing £2.6bn of EU product, while exporting £0.9bn worth. If the EU’s current tariffs were to be applied in both directions, it could theoretically add costs in the region of £1.5-2.0bn per year. In addition, non-tariff barriers such as import certification procedures, can also add significant costs.

We don’t yet know what the trade relationship between the UK and EU will look like after Brexit. In reality, if tariffs were introduced, current trade patterns would likely be significantly disrupted by the added cost. AHDB will discuss the potential knock-on effects of this in a future article.

More information on UK-EU trade and the potential scenarios after Brexit can be found in AHDB’s series of Horizon publications, and in previous articles.

*Based on current EU-28 import tariff rates and UK wholesale prices for Feb-17