What Tariff Retaliation Is & Why It Should Be On Your Board Agenda

As global trade tensions escalate, tariff retaliation has become a critical concern for business leaders. This tit-for-tat approach to trade policy, where countries respond to tariffs with their own counter-measures, can rapidly disrupt supply chains and impact profitability.

In this article, we’ll break down the mechanics of tariff retaliation and its implications for businesses. From understanding current trade tensions to developing practical response strategies, we’ll provide the insights you need to navigate trade in an uncertain global market.

Need expert guidance on managing tariff risks? Contact clearBorder for personalised trade support.

Understanding Tariff Retaliation

When one country raises taxes on imported goods (tariffs), the affected country often responds by also increasing tariffs on the other country’s products. This tit-for-tat response is called tariff retaliation. Countries engage in tariff retaliation for a variety of reasons, the most common being:

• Pressure the opposing nation to reconsider its stance
• Demonstrate economic strength
• Defend their economic interests
• Maintain bargaining power in trade negotiations
• Exercise political influence

Retaliation can escalate quickly, potentially leading to trade wars that significantly disrupt global commerce. Retaliation typically takes the form of increased import duties, but can also include non-tariff trade barriers. Understanding tariff retaliation is crucial for businesses navigating international trade.

The Current Trade Landscape: Trump’s Trade Wars in 2025

Global trade in 2025 is characterised by escalating tariff measures, initiated by the Trump administration’s 25% tariffs on all steel and aluminium imports. In addition to these blanket tariffs, the Trump administration has also imposed tariffs on specific countries.

Trump’s Tariffs on China

In April 2025, the US imposed tariffs of 145% on Chinese imports. When Trump announced US tariffs on Chinese goods, the Chinese government also responded with 125% retaliatory tariffs on US products. However, the initial tariffs have since been renegotiated, with the US agreeing to lower tariffs to 30% and China agreeing to lower them to 10%.

Tariffs on EU Countries

President Trump’s 10% blanket tariff on EU goods was set to increase to 20% on 9 April 2025. However, after the initial announcement, the US paused the tariffs for 90 days, applying only the blanket rate during this period to allow for negotiations

However, the European Commission responded by imposing previously suspended tariffs, targeting US products such as boats, bourbon, and motorcycles. The EU Commission has also begun the process to impose additional tariffs on the US, targeting approximately €18 billion worth of US goods.

Both sides have paused some tariffs to allow for negotiations, but each is preparing to escalate if trade talks fail. On 23 May 2025, Trump threatened to raise EU tariffs to 50% as soon as 1 June, frustrated by the pace of trade talks. This date has now been moved to 9 July 2025.

How Increasing Tariff Rates Affect the Global Economy

The current reciprocal tariffs implemented worldwide have introduced considerable uncertainty into global trade, resulting in volatility across international stock markets.

Although these tariffs were justified by claims of national security concerns and trade imbalances, they have significantly impacted major economies, including the European Union, the US, and China. Wall Street has experienced notable declines, illustrating the negative impact of tariffs on the global economy. In addition, the UK’s FTSE 100 has also faced downward pressure.

Ongoing negotiations between the US, EU, and China remain crucial as these key economic players seek to address the escalating tariff conflicts and mitigate their wider economic implications.

Impact of Retaliatory Measures on the UK Economy

The US administration’s tariffs and subsequent countermeasures from the EU and China have had immediate effects on businesses and consumers worldwide. In the short term, UK companies may face higher costs for steel and aluminium imports, potentially leading to increased prices in various sectors.

Long-term, these trade tensions could significantly impact the UK economy. Prolonged uncertainty may dampen investment, affecting GDP growth and employment. The Bank of England might need to adjust its monetary policy to manage inflation resulting from tariff-induced price increases.

These developments will likely influence future trade talks and agreements. As the UK negotiates new trade deals post-Brexit, the global landscape shaped by trade disputes will play a crucial role. The UK may need to navigate carefully between competing trade blocs, balancing economic interests with diplomatic considerations.

Furthermore, this new order in international trade could reshape supply chains and alter the competitiveness of UK goods and services in the global market.

How Current Tariffs Affect UK Businesses

President Trump’s tariffs on steel and aluminium, and the subsequent EU countermeasures led by Ursula von der Leyen, have reshaped the global trade landscape. Although the UK may not be directly involved in the current trade tensions, the ripple effects of tariff retaliation significantly impact British businesses.

These trade measures affect supply chains that span multiple countries, potentially increasing costs for UK companies sourcing industrial goods or raw materials from affected regions. The volatility in tariff rates can influence import and export costs, compelling businesses to renegotiate contracts or seek alternative suppliers.

Higher prices resulting from these tariffs may lead to increased inflation, affecting consumer purchasing power and potentially dampening demand for UK exports. This can impact the competitiveness of British exporters in both EU countries and other international markets.

Specific industries, such as manufacturing and agriculture, may face particular challenges. For instance, UK car manufacturers relying on US or Chinese components might see increased production costs, while farmers could face altered global commodity prices due to changing trade patterns.

Understanding these dynamics is crucial for UK businesses as they navigate investments, adapt export strategies, and engage in bilateral trade negotiations in this new global trade environment.

Looking to mitigate the impact of tariffs on your business? Contact clearBorder for personalised trade support.

The Role of Business Leaders

Business leaders can implement several strategic measures to mitigate the impact of retaliatory tariffs on their operations:

• Assess supply chain vulnerabilities. For example, in the wake of steel and aluminium tariffs, assess how these tariffs could affect production costs. It’s also crucial to diversify suppliers and markets, reducing dependency on regions facing trade tensions.
• Review pricing strategies to determine how increased costs can be absorbed rather than passed to customers who may already pay more for affected goods.
• Consider exploring new opportunities in emerging markets unaffected by current tensions. The UK is currently establishing new free trade agreements post-Brexit. This could open up opportunities with other countries and new trading partners.

Amidst changing tariffs, taking a proactive rather than reactive approach is crucial. Business leaders must find ways to prepare for new US-led trade realities, rather than engaging only in crisis management.

Business leaders must stay vigilantly informed on evolving trade policies and negotiations, monitoring developments that could impact operations. Trade consultants can provide real-time insights into changing trade policies. Regular engagement with industry associations and government bodies also provides valuable intelligence and collective advocacy opportunities.

Boards must establish clear protocols for various tariff scenarios, including supply chain alternatives and financial buffers. Leaders should also advocate for free and fair trade through appropriate channels, contributing to a stable trading environment.

Navigating Changing Trade Policies with clearBorder

At clearBorder, our specialists can help businesses navigate complex tariff landscapes, prepare for regulatory changes, and identify strategic opportunities amid trade tensions. We also provide training and consultation on key aspects of trade like customs compliance and export controls. 

Our independent perspective and practical approach can help business leaders ensure their business can trade effectively, identify reliable supply chains, and manage costs, regardless of geopolitical shifts. Whether you’re dealing with immediate tariff challenges or planning for future trade scenarios, our experts provide the insights and support you need to make informed decisions.

Contact clearBorder today for expert guidance on managing tariff risks.