What are tariffs and how do they affect the prices consumers pay?

The government has announced that tariffs would be slashed to zero on 87% of imports should Britain crash out of the EU without a deal, while keeping higher border taxes on some sensitive products.

Here is how the plan might work.

What is a tariff?
Tariffs are border taxes charged on foreign imports. Importers pay them upon entry to the customs agency of the country or bloc imposing them – in Britain’s case HM Revenue & Customs.

Tariffs raise money for governments, but are primarily used to raise the price of foreign goods, protecting domestic producers from global competition.

Countries signed up to the World Trade Organization (WTO) must impose tariffs at the same level for all other WTO-member trading partners under the organisation’s “most favoured nation” rule – unless they secure alternative deals with particular countries or trading blocs.

The UK currently collects tariffs on goods arriving in Britain from outside the EU at rates set by Brussels. The money is passed on to the EU, minus a share to cover the cost of the collection.

The UK is poised to become an independent member of the WTO upon exiting the EU, which represents Britain at the WTO.

Ministers have only reached agreement with a handful of countries – including the Faroe Islands, Switzerland and Israel – to continue with the same trade deals the UK currently has access to under EU membership.

How will it work?
As a member, the UK benefits from tariff-free trade with the EU , which would end under a no-deal scenario. Ministers unilaterally dropping tariffs to 0% should help to mitigate this.

longer-term policy.

The measures would apply on imports from 11pm on 29 March 2019, if the UK leaves without a deal.

A reduced or zero rate of duty could may apply on a specific quota of goods, after which goods would attract a higher tariff.

For the 13% of goods imported to the UK where tariffs will apply, the government said there would be a mixture of tariffs and quotas designed to protect UK producers, mainly in the agricultural and manufacturing sectors.

Beef, lamb, pork, poultry and some dairy products will incur tariffs at or near the rates set by the EU. Among the rates are tariffs on beef at 53% of the EU rate, poultry at 60% and butter at 32%.


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