UK and Trump in new tariff discussions as businesses sound alarm

British exporters who spent the past weeks adjusting to a negotiated 10% US tariff rate are now facing a 15% baseline instead, after President Trump was forced to rewrite his entire trade policy following a Supreme Court defeat. The diplomatic coup that Number 10 quietly celebrated in March has evaporated in days. The whiplash comes after America's highest court struck down the legal framework Trump used for his 'Liberation Day' tariffs.

The constitutional trap

The irony is almost elegant. Trump's previous tariff regime allowed him to hand out sweetheart rates to favoured trading partners. Britain's 10% deal looked like evidence that Keir Starmer's outreach strategy was working, particularly compared to the EU's 20% rate.

But the Supreme Court ruling forced the administration onto different legal ground, one that requires non-discriminatory application of tariffs. Paul Ashworth, chief North America economist at Capital Economics, described the development as "something of an eff you" for the UK, though he noted the hit was "unavoidable" given the new legal constraints.

Companies had barely begun implementing cost adjustments for the 10% rate when the rug was pulled.

What's particularly galling for British businesses is the timing. William Bain, head of trade policy at the British Chambers of Commerce, warned the additional five percentage points would be "bad for trade, bad for US consumers and businesses and weaken global economic growth."

Education Secretary Bridget Phillipson told Sky News on Sunday that "discussions are ongoing" to maintain the preferential arrangement, expressing hope it could continue. Her assurance that businesses would "get everything that they need" sits awkwardly against the reality that the UK has limited leverage to enforce a deal that no longer fits within America's new legal framework.

The revenue question

Trump characterised the Supreme Court's decision as "ridiculous, poorly written, and extraordinarily anti-American" on his TruthSocial platform. Legal scholars would dispute that framing, pointing out the court simply upheld constitutional limits on executive authority. But the president's fury is understandable from a fiscal perspective.

According to US Treasury data, customs duties have generated approximately £240bn in the past year, roughly £180bn more than the equivalent period in 2024. Ashworth suggests the shift to a higher baseline rate stems partly from Trump disliking how "a lower effective rate would generate lower custom duties too."

British exporters are collateral damage in a revenue grab rather than casualties of any coherent trade rebalancing strategy.

If that analysis holds, the original Liberation Day rhetoric emphasised protecting American industry and addressing trade imbalances. The actual implementation increasingly resembles a new consumption tax on US buyers, with import duties functioning as a funding mechanism for the administration's spending priorities.

Speculation has emerged that businesses could pursue refunds for duties paid under the now-invalidated tariff framework, potentially putting the Trump administration on the hook for $120bn. Whether such claims have legal merit remains unclear, but the mere possibility hints at the procedural chaos the Supreme Court ruling has created.

What negotiating with Washington is worth

Liberal Democrat leader Ed Davey's suggestion that Starmer should sue Trump for $100bn in damages makes for attention-grabbing headlines but reveals something more significant: the growing sense that conventional diplomatic channels are producing nothing of substance. "It's the only language he understands," Davey told the Press Association, a sentiment that reflects mounting frustration across the political spectrum.

The UK's predicament exposes uncomfortable questions about post-Brexit trade strategy. Britain has prioritised the US relationship, with Starmer making considerable effort to court an administration that many in his party view with distaste. The return on that investment now appears to be precisely nothing.

For businesses caught in the middle, the issue isn't just the tariff rate itself but the impossibility of planning when terms can be rewritten overnight. Supply chains require stability. Contracts are negotiated months in advance. Margins are calculated based on knowable costs.

That predictability has vanished. Companies that accepted the 10% rate and adjusted pricing accordingly now face the choice of absorbing the additional cost or passing it to American buyers, potentially pricing themselves out of the market. Those that delayed implementation hoping for further concessions are now vindicated, which creates its own perverse incentive against taking anything the administration says seriously.

The episode suggests that securing concessions from this White House may be less valuable than finding ways to reduce exposure to US markets entirely. Several large British exporters have already begun exploring routing arrangements through third countries or accelerating diversification into Asian markets, according to industry sources.

Whether the UK can extract any meaningful commitment from Washington under the new legal framework remains to be seen, though the structural constraints make sweetheart deals legally dubious. British officials are left negotiating for something the US president may lack the constitutional authority to grant, even if he were inclined to do so. That's not diplomacy. That's theatre.