As if Britain did not have enough on its trade policy plate with Brexit and the very real possibility of a no-deal exit from the European Union, the nation and its luxury businesses now have to face the cold reality of U.S. tariffs on products including cashmere sweaters, men’s suits and women’s swimwear.
Britain’s businesses and lobby groups said the levies of 25% could not have come at a worse time, with Brexit set to take place on Oct. 31, and U.K. manufacturers and brands looking for ways to increase exports outside the EU.
The U.S. is the single most important market for British luxury exports, according to the industry lobby Walpole. It is also Britain’s second-largest trading partner after the EU.
The tariffs will come into effect on Oct. 18. They are the result of a World Trade Organization ruling that stems from a long-running dispute between the U.S. and the EU over subsidies to the aviation industry.
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The U.S. has long accused Europe’s largest countries of indirectly and illegally subsidizing the aviation industry, to the detriment of U.S. workers. The U.S. first brought its complaint against the EU in 2004, and on Wednesday, the Geneva-based organization ruled that the U.S. had the right to retaliate with punitive tariffs.
The U.S. has also accused Europe of flouting the WTO’s past rulings in the matter. The U.K. and Germany were hit particularly hard by the WTO ruling as they are the main manufacturers of Airbus parts.
Helen Brocklebank, CEO of Walpole, called the ruling a “disappointment” at a critical moment of growth for British luxury goods.
Later this month, she will be taking a delegation of brands to the U.S. to promote British luxury businesses, following a similar trip last year. On Wednesday, U.S. Ambassador Woody Johnson hosted a second annual event in honor of Walpole, its brands and its ties with the U.S. at his official residence, Winfield House, in Regent’s Park.
While Brocklebank acknowledged that the tariff list could have been worse — it does not include leather goods, for example — the news is still troubling.
“I think for iconic manufacturing businesses like cashmere, this is an incredible disappointment and comes amid a number of global disruptions to the market. We have also grown this industry 49% over the last four years and, left to our own devices, we would have been able to continue that extraordinary pace of growth. To have this new sanction at a very sensitive time for the U.K. feels hard,” she said.
Brocklebank said members of the Walpole team are in Brussels, working with their European Union counterparts to respond to the ruling. The irony is that the U.K. and the European Union are united in their bid to fight the tariff decision as Britain continues to wrestle with European leaders over the terms of its exit from the union.
The tariffs will apply whether the U.K. leaves the European Union with or without a deal.
Like Walpole, Savile Row tailor Richard James is pressing ahead with a visit to the U.S. On Oct. 24, Richard James and Sean Dixon, co-founders of the Savile Row tailor, will be hosting an evening at the brand’s new Manhattan store. They’re taking the bespoke team with them and said the U.S. continues to be a big focus for the company.
As for the tariffs, Dixon said, “We’ll try to absorb as much of them as we can, and not pass them onto the customer. We’ll be looking at everything in more detail,” as the tariff story progresses.
Burberry, Britain’s largest luxury brand, said it would not be impacted by the tariffs as its Yorkshire-made trenchcoats and cashmere scarves from Scotland have not been included on the list. “We are continuing to monitor developments closely,” a company spokesman said.
Late Wednesday, Britain’s Department for International Trade said, “The U.K. government is clear that resorting to tariffs is not in the interests of the U.K., EU or the U.S. We are working closely with the U.S., EU and European partners to support a negotiated settlement to the Airbus and Boeing disputes.”
The statement said the British government is also seeking confirmation from the WTO that the U.K. “has complied fully with WTO rulings regarding support to Airbus and should not be subject to tariffs.”
Adam Mansell, CEO of UKFT, the organization that represents British businesses in spinning, weaving, knitting, manufacturing and fashion, has called on both sides to resolve the 15-year-old trade dispute as quickly as possible.
“At a time when the industry is facing huge uncertainty over the impact of Brexit, it is devastating that one of our key non-EU markets has imposed such significant tariffs on products that have nothing to do with the aircraft dispute,” Mansell said.
“Some of our leading manufacturers will be hit by theses punitive tariffs, and that will undoubtedly affect jobs and investment.”
Simon Cotton, ceo of Johnstons of Elgin, the largest manufacturer cashmere knitwear in the U.K., and a board member of UKFT, said the tariffs will have a “significant impact” on his company, and on the country’s knitwear industry.
“The U.S. is our third largest export market behind Europe and Japan, and the U.S. consumer has a great affinity with British high-quality knitwear. We urge all parties involved to come to an agreement quickly for the sake of British manufacturers and U.S. consumers.”
Patrick Grant, who works across the menswear industry with his Savile Row brand Norton & Sons, the ready-to-wear label E. Tautz and a social project known as Community Clothing, said: “British menswear, especially tailoring and cashmere knitwear, has long been loved by stylish American men. It seems that this ruling will hurt U.S. consumers, it will hurt U.S. retailers, and will probably hurt U.K. manufacturers.”
Brocklebank said her hope is that the U.S. and the EU “downscale” the tensions quickly. “Ultimately what happens is that the U.S. consumer has to carry the impact, and that is a real shame.”
In mainland Europe, having seen tens of billions of dollars wiped off their market cap Wednesday amid tariff fears, many luxury fashion brands’ stocks somewhat recovered Thursday.
That was because, unlike British brands, they were spared additional U.S. levies on apparel and handbags despite President Donald Trump previously threatening that both categories would be targeted.
Hermès International rose 0.8% to 605 euros; Kering, whose brands include Gucci and Balenciaga, 0.4% to 438 euros, and Salvatore Ferragamo, 0.4% to 16 euros.
LVMH Moët Hennessy Louis Vuitton, which escaped tariffs on apparel, leather goods and Champagne but was hit by the administration’s levies on Scotch whisky and wine, saw its stock rise by 0.8% to 347 euros.
Trump remained relatively quiet on the matter Wednesday, but took to Twitter Thursday to describe the World Trade Organization’s decision to allow it to impose $7.5 billion of tariffs on Europe as “a nice victory.”
For now, European authorities are waiting for WTO approval to respond with their own retaliatory tariffs on American goods, likely to come into force next year.
They have prepared a potential list of goods to be targeted, totaling $20 billion.
This story was reported by WWD and originally appeared on WWD.com.