No-Deal Brexit Tariffs for Households

by Erin Yurday - November 7, 2022

With Brexit negotiations looming on the horizon, we wondered how UK families might be impacted by potential trade uncertainty. Last year, the average UK household purchased goods imported from the EU worth over £3,000. If the government hasn't reached a trade deal when the UK leaves the EU, these imported goods will likely be subject to tariffs.

If retailers pass through these tariffs to consumers, the costs of some popular imports could jump by around 10% (e.g., cars and clothing), 20% (e.g., chocolate) or even 40% (e.g., some meat and dairy products), costing the average UK household an estimated £325 a year out of pocket.

These tariffs will only come to pass if there is no trade deal (and no transitional agreement to cover the time between leaving the EU and the implementation of a new trade deal), in which case trade will be bound by World Trade Organization (WTO) terms. Under WTO rules, without a trade deal or agreement, by default any UK exports to the EU would be subject to the EU's "Most Favoured Nation (MFN)" tariffs. The UK government has said they plan to replicate the EU's tariffs in the short term, which means that imports into the UK from the EU would be subject to these same tariffs.

While the government has stated its desire to enter into a Free Trade Agreement with the EU, these deals can take years to negotiate. The EU-Canade trade deal (CETA) took 7 years to negotiate and is still not ratified or implemented. With the UK due to leave the EU in less than two years, it seems at least possible that our imports will be taxed under WTO rules for a time. What impact could these MFN tariffs have on the average household?

EU Products Bought by UK Households

We gathered data from Europa.eu, the official website of the European Union, in order to understand the value of ordinary products bought from the EU, such as cars, wine, cheese, perfume, pasta, clothing, flowers, etc. by UK households over the course of a year.

The largest import category by a mile is automobiles. The UK imported over £30 billion worth of cars from EU countries in 2016, excluding vehicles such as lorries and motorcycles. This import category alone is the equivalent of £1,200 per UK household each a year. (In reality, of course, households purchasing an imported car in a given year would spend multiples of this number, and households not purchasing an imported car would spend £0 on this category.)

Well over £800 of the average household’s annual budget is spent on food imported from the EU. UK families consumed EU meat and fish valued at nearly £200, fruits and vegetables valued over £100 and cereal, pasta and bread worth £100 per year.

The chart shows the value, on a per UK Household basis, of popular consumer goods that are imported from the EU.

Potential Tariffs on Popular Consumer Imports, if No Trade Deal

A large part of the Brexit negotiations will center around trade. As a part of the EU, the UK currently does not pay any tariffs on goods imported from the UK. However, this may change if a free trade agreement is not worked out before the UK's exit from the EU.

Without a trade agreement in place, the default tariffs will likely be treated as the EU's erga omnes (Latin for “towards all” or “towards everyone”) tariffs, more commonly known as the Most Favoured Nation (MFN) tariffs. To get a better understanding of the tariffs that might be imposed on the popular product categories in our study, we gathered EU MFN tariff data from the WTO.

We found there is a large range of possible MFN tariffs, with individual products being taxed anywhere from 0% to 70%, or more. Within a given broad category (e.g., clothing) there are often multiple tariffs (e.g., ties 6.3%, gloves 7.6%, shirts 12%). While some tariffs are displayed as percentages of the value (called "ad valorem"), others are imposed as a fixed charge per weight (e.g., 56.6 Euros per 100 kg). In order to calculate a reliable tariff percentage estimate across a broad category, we used a combination of methods that you can read about in our methodology section below.

The highest average tariffs generally apply to imported meat and dairy, with possible tariffs broadly around 40%, depending on the cut of meat or type of cheese, for instance. Chocolate, sweets, jams and tinned tomatoes are in the 20% range. Cars, clothing, shoes, fish, waters, pasta and bread may be subject to a tariff around 10%.

Based on our research, we have estimated possible tariffs for imports in each broad category, as shown in the table below. The actual tariff schedules for categories such as dairy, meat and sugar are quite complicated. The tariff indications below are estimates only, meant to give an idea of the scope of the taxes.

CategoryEstimated MFN Tariff
Dairy42.1%

Meat
41.2%

Sweets and Sugar
25.2%

Chocolate
18.7%

Caviar & Prepared Fish
18.5%

Tinned Tomatoes, Jams, Truffles, etc.
17.5%

Sausages
15.4%

Cereal, Pasta, Bread, etc.
14.9%

Clothing
11.3%

Fish & Seafood
11.1%

Footwear
11.1%

Cars
10.0%

Sauces, Soups, Ice Cream, etc.
9.2%

Vegetables
8.8%

Fruit & Nuts
8.2%

Coffee
7.6%

Waters
7.3%

Flowers, Trees, Plants, Bulbs, etc.
6.9%

Wine
5.8%

Leather Goods
4.6%

Toys, Games & Sports Equipment
2.3%

Furniture, Duvets, Cushions, etc.
2.3%

Jewelry & Gems
0.6%

Medicines (Retail)
0.0%

Make up & Sunscreen
0.0%

Perfume
0.0%

How Much Could Tariffs Cost Average UK Households?

If there is no free trade deal or transitional agreement in place by the time the UK leaves the EU, retailers may or may not pass through the anticipated EU MFN tariffs to consumers. If any tariffs are in fact passed through, then consumers will pay more for items imported from the EU. What is the real impact to British wallets? We've analysed the data and approximated the cost of these tariffs to the average UK household, based on 2016 purchasing patterns, as shown in the table below.

Estimated Impact of Tariffs to the Average UK Household

CategoryAnnual Purchases from EU27, per UK HouseholdEstimated Tariff (%)Estimated Tariff Impact per UK Household (£)

Cars
£1,16810.0%£117

Meat
£13241.2%£54

Dairy
£8342.1%£35

Clothing
£19911.3%£23

Cereal, Pasta, Bread, etc.
£9914.9%£15

Tinned Tomatoes, Jams, Truffles, etc.
£8017.5%£14

Footwear
£8711.1%£10

Chocolate
£5118.7%£10

Sauces, Soups, Ice Cream, etc.
£749.2%£7

Vegetables
£738.8%£6

Sweets and Sugar
£2525.2%£6

Fruit & Nuts
£688.2%£6

Wine
£705.8%£4

Fish & Seafood
£3411.1%£4

Furniture, Duvets, Cushions, etc.
£1492.3%£3

Flowers, Trees, Plants, Bulbs, etc.
£376.9%£3

Sausages
£1415.4%£2

Leather Goods
£464.6%£2

Caviar & Prepared Fish
£1118.5%£2

Waters
£187.3%£1

Jewelry & Gems
£1680.6%£1

Toys, Games & Sports Equipment
£392.3%£1

Coffee
£117.6%£1

Medicines (Retail)
£3230.0%£0

Make up & Sunscreen
£390.0%£0

Perfume
£240.0%£0

Total
£3,121£325
chart showing How Much Could Tariffs Cost the Average UK Household

Methodology

We analysed 2016 import data from the Export Helpdesk, a service provided by the European Commission, to determine the value of everyday, finished goods purchased by UK households from the rest of the EU28 countries. We considered goods that a consumer might buy directly from retailers throughout the year, such as cars, soap, make up, bread, etc. We then divided these import values by the 27.1 million households in the UK, to get a per household value.

This research is meant to quantify the larger categories of finished products most relevant to daily purchases by UK households, which are imported from the EU. Therefore we did not include imported goods more likely to be purchased and/or processed by companies rather than individuals (e.g., lorries, airplanes, chemicals for manufacturing, grains, etc.). Also, data from smaller categories (e.g., riding crops, baby carriages, etc.) was excluded.

Most Favoured Nation (MFN) Tariff data was gathered using the Tariff Download Facility from the World Trade Organization. MFN tariff estimates per category were approximated by averaging across products, with an element of weighting involved, where necessary. Also, tariffs in fixed terms (e.g., 50 euros/100 kg) were converted to an approximate percentage equivalent, by dividing duties (based on actual trade volumes) by the actual customs values.

For example, the tariff for wine was calculated as follows. The MFN max tariff for wine is €32/hl (hectolitre, or per hundred litres). In 2016, 702,809,000 kg of wine valued at €2,314,344,479 was imported into the UK from Europe. Now, to convert kg of wine into litres of wine, we use the approximation that a 750ml bottle of wine weighs 1.25 kg, so 1 hl of wine weighs about 167 kg, making the €32/hl tariff equivalent to €32/167 kg or €0.19/kg of wine. That's a duty of about €134,912,346 for a customs value of €2,314,344,479, or 5.8%.

Finally, it is important to note that the data gathered represents the customs value, or cost, of goods as they cross into the U.K. Since businesses incorporate a profit into the retail price, consumers’ out-of-pocket costs for these product categories will be even greater than the values shown.

Sources

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