EU secures better US tariff terms than UK via forced labour law
Washington's latest tariff rationale has handed the EU a structural trade advantage over the UK, pressuring London to reconsider its approach to Chinese supply chains.
The US has extended its tariff regime to allies under a new justification of combating forced labour, a shift that has left the UK at a structural disadvantage to the EU. While both face a headline rate of 10%, the EU secured a flat levy whereas the UK's rate will stack on top of existing duties for goods like footwear and textiles.
For European businesses, the UK's predicament illustrates how regulatory alignment with Washington is becoming a prerequisite for favourable trade terms. The divergence stems from domestic legislation rather than actual supply chain practices. The EU recently passed a ban on forced labour goods, mirroring US law, which granted it preferential treatment. The UK has not passed such a ban, relying instead on a lighter voluntary due diligence regime.
William Bain, a trade expert at the British Chambers of Commerce, notes that this legislative gap has created a clear competitive advantage for EU exporters into the US in certain sectors. The UK government had previously stated it remained "firmly opposed to the use of state-imposed forced labour" but cited "operational and legal complexities" in deciding how to legislate the ban.
London did negotiate specific side deals to protect key exports, with tariffs exempted for medicines, steel, aluminium, cars and whisky. As a result, the trade-weighted effective tariff rate sits at 6.8% for the UK and 8.5% for the EU. However, the early advantage the UK gained by signing the first post-Brexit trade agreement has effectively dissipated.
Passing a forced labour ban is widely seen as a backdoor method to target China, specifically over conditions in its Xinjiang province. Adopting such a law would clash with the UK's current geopolitical balancing act, as the government recently welcomed imports of Chinese cars and is exploring a services trade deal with Beijing.
This regulatory maneuvering highlights a broader trend in the global tariff war. The US has repeatedly shifted its stated rationale for tariffs—moving from the opioid crisis to migration and manufacturing—to shield the levies from congressional or judicial challenges. As one industry figure described them, these are "tariffs in search of an authority."
While Washington attempts to wall off its market, global trade routes are shifting. China's total trade with the US was flat in the first half of the year, but its overall global trade surged by 21%. This included a 14% increase with the EU, an 11% rise with the UK, and a 24% jump with Africa. London must now decide whether to maintain its current posture or yield to US pressure and implement a forced labour ban to secure broader relief.
