Imposing US tariffs on UK steel would be “negative” for both countries, according to the UK’s Business Secretary, Jonathan Reynolds. He emphasized that the UK and the US have a “mutual interest” in negotiating an exemption from President Donald Trump’s planned 25% import tax on steel, which could come into effect in March. These US tariffs on UK steel have raised significant concerns about their potential impact on both nations’ economies.
Reynolds argued that the UK’s unique position in global trade could offer specialized steel and aluminium exports that the US needs, such as Navy submarine casings made in Sheffield. On the other hand, Reynolds warned that imposing US tariffs on UK steel would push up costs for US taxpayers.
Reynolds’ comments follow a government promise of up to £2.5 billion in support for the UK’s steel industry. Despite President Trump’s stance that his tariffs would be enforced “without exceptions or exemptions,” Reynolds expressed optimism that the UK could still secure an exemption, citing constructive conversations with US officials.
Will the Tariffs Harm Both the US and the UK?
“I appreciate that the US administration has a mandate for changing how they approach trade issues, but we have a different argument and a different story to tell compared to the EU or China in relation to our trading relationships,” Reynolds noted.
The UK is not a major supplier of steel to the US, accounting for only around 10% of British steel exports. However, there are concerns that the tariffs could not only hinder exports to the US but also result in excess steel being “dumped” in the UK. This could occur if countries that are no longer exporting steel to the US choose to offload it at lower prices in the UK market, potentially undercutting UK steel businesses.
The UK Steel organization, representing the industry, has warned that the US tariffs on UK steel would be a “devastating blow” to the sector, which contributes £400 million annually to UK-US trade.
Why Are Steel Industry Stakeholders Concerned About Tariffs?h the US and the UK?
“Uncertainty surrounding the steel industry due to US tariffs on UK steel is something the government has been entirely silent on, when instead they should be talking to the US, our closest trading partner,” said Shadow Business Secretary Andrew Griffith.
In response, the UK government launched a consultation on its “Plan for Steel,” aimed at addressing long-standing issues facing the industry, including the threat of cheap imports flooding the domestic market.
The UK steel sector has been grappling with heavy job losses in recent years. Tata Steel, for example, is replacing traditional blast furnaces with electric arc furnaces at its Port Talbot site in Wales. This shift is less energy-intensive and more environmentally friendly, but it has resulted in 2,800 job cuts. Similarly, British Steel announced in 2023 the closure of blast furnaces in Scunthorpe, as it transitions to electric arc furnaces, putting 2,000 jobs at risk.
How Will Technological Changes Affect Employment?
Reynolds acknowledged the potential for job losses in Scunthorpe but remained optimistic that more jobs could be created if demand for UK steel increased. He stated, “With the introduction of new technologies, there will be a reduction in headcount, but there is an opportunity for more jobs if the demand for UK steel rises.”
The government’s plan aims to tackle several challenges facing the industry, including:
- Identifying opportunities to expand steel production.
- Encouraging the use of UK-made steel in public infrastructure projects.
- Improving scrap processing facilities.
- Investing in electric arc furnaces, which are less energy-intensive than traditional blast furnaces.
- Addressing high electricity costs for steel companies to make UK production more competitive globally.
However, the government has not made a firm commitment to reducing energy bills for the sector, a key concern for industry stakeholders.
Will the Government's Plan Help the Struggling Sector?
Andrew Griffith, the Shadow Business Secretary, emphasized the need for the government to take action on energy costs. “A clear part must be steps to reduce the cost of energy, which is placing an intolerable strain on UK steel,” he said.
The UK government has also pledged support for the steel sector through the National Wealth Fund, a partnership between the government, the private sector, and local authorities to finance infrastructure and other projects. This funding could benefit areas such as Scotland, Scunthorpe, Lincolnshire, Rotherham, and Redcar, which have strong historical ties to steel production.
How Will the UK's Steel Industry Be Supported?
The Department for Business and Trade (DBT) highlighted that the government is already taking steps to support the industry, referencing the ongoing expansion of Heathrow Airport, which will require 400,000 tonnes of steel.
The GMB union praised the government’s plan to support the “beleaguered” steel industry, calling it “desperately needed” funding after “years of dithering.” Union national secretary Andy Prendergast emphasized the importance of domestic steelmaking capacity, stating, “As the world becomes more volatile, primary domestic steelmaking capacity is vital for both our economy and domestic security.”
Gareth Stace, director-general of UK Steel, welcomed the government’s commitment, noting that a strong and robust strategy could help reverse the decline of the sector, especially as the industry faces increasing competition from imports benefiting from more favorable business conditions.
Can the UK Prepare for Potential Retaliatory Tariffs?
As the situation remains uncertain, the Liberal Democrats have called for the government to urgently prepare for retaliatory tariffs. Deputy leader Daisy Cooper warned that the UK steel industry is being left “dangerously exposed” to the “devastating damage” that US tariffs on UK steel could cause.
The government’s consultation on the steel industry will continue into the spring, and the information gathered will inform a “steel strategy” aimed at addressing the sector’s challenges and ensuring its future competitiveness on the global stage.
