What are tariffs?
A tariff (or ‘trade tariff’) is a tax that a government charges on goods imported into a country. Tariffs tend to be used to:
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protect local industries from overseas competition
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encourage people to buy domestic products
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raise revenue for the government
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encourage or discourage trade with certain countries
Trade tariffs are often expressed as a percentage of the value of the imported goods or as a fixed fee per unit. In the UK, tariffs are governed by the Taxation (Cross-border Trade) Act 2018.
What is the difference between a tariff and a duty?
While the terms ‘tariff’ and ‘duty’ are often used interchangeably, they aren’t exactly the same thing, despite both being government-imposed taxes.
As stated above, a tariff is a rate of tax applied specifically to goods imported into or exported out of a country. The government sets the tariff rate, and this rate determines the duty. In other words, a duty is the actual amount paid based on a tariff.
For example, if a business imports £2,000 worth of aluminium and the applicable trade tariff rate is 10%, the duty would be £200.
Various types of duties exist, including customs duty and excise duty.
Do tariffs apply to all imported goods?
No, tariffs do not apply to all imported goods. In the UK, the UK Global Tariff (UKGT) operates, which outlines which goods have tariffs and which do not. Goods may be tariff-free if they:
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come from a country with which the UK has a trade agreement (see the government’s website for a list of all trade agreements that are currently in force)
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are subject to an exemption (eg if a tariff suspension applies or tariff relief is in place)
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come from a developing country covered by the Developing Countries Trading Scheme (DCTS) (designed to boost trade with developing countries to help them grow and develop)
Any goods from countries not covered by the above will be subject to tariffs under the UKGT. The applicable tariff will depend on the imported goods, country of origin, and quantity of imported goods.
You can use the government’s Trade Tariff lookup tool to determine applicable rates.
For more information on importing and exporting goods in general, read Importing and exporting goods to and from the UK.
How do tariffs affect businesses in the UK?
Understanding how tariffs affect businesses is essential for importers, retailers, manufacturers, and even service providers. Key ways in which they may impact businesses include:
Increased costs
Tariffs raise the price of imported goods. If you're a manufacturer, retailer, or wholesaler importing parts or goods, you'll likely face higher costs. For example, a clothing retailer importing garments from countries without a UK trade deal may pay additional charges per item or based on the shipment’s overall value.
Supply chain decisions
Businesses may need to rethink who they buy from and where they source products. You may decide to switch to a UK-based supplier or a supplier in a country with a trade agreement to avoid tariffs altogether.
Pricing and competitiveness
You may be forced to raise your prices to cover the cost of tariffs, which can affect how competitive your products are. Alternatively, you may absorb the cost and accept lower profit margins.
Administrative burden
Importing goods subject to tariffs often involves extra paperwork. You’ll need to declare the correct classification codes, calculate the appropriate tariff rates, and stay up to date with any changes to the UKGT.
Export retaliation
Tariffs can sometimes lead to trade disputes. If other countries impose tariffs in response, UK exporters could also face higher costs when selling abroad, making it harder to compete in overseas markets.
For more information on importing and exporting goods, read Importing and exporting goods to and from the UK.
Do I need to worry about tariffs if I shop online?
When shopping online and buying from overseas retailers, it’s worth paying attention to tariffs because they may affect the final price you pay. Sometimes, international sellers include any import charges, tariffs, or taxes in the price you see at checkout. But often, these costs aren’t clear upfront.
If you’re buying from outside the UK or from a country outside a free trade agreement, there’s a chance that customs will add tariffs and other fees when your purchase arrives. This could mean paying more than you expected (sometimes quite a bit more) once VAT and handling fees are added on top.
That said, it depends a lot on where your item is coming from. If your purchase is from a country with a trade agreement with the UK (eg Australia), tariffs might not apply, or they may be significantly reduced. But if it’s coming from somewhere without such agreements (eg China), you should be prepared for extra charges.
Returns can also be tricky. If you decide to send an item back, you might not get the tariffs or duties refunded, which can add to the overall cost of buying from overseas.
In short, while not every online purchase will be hit with tariffs, it’s a good idea to check where the product is coming from and whether import fees are included before you click ‘buy’. That way, you avoid surprises and know exactly what you’re paying for.
If you have any questions or concerns, do not hesitate to Ask a lawyer.
