The Tariff Impact of Hard Brexit: Taking back Control Comes at a Price

In the so-called Brexit Referendum of June 2016, the British people voted to leave the European Union. With no deal in sight yet, a plausible scenario is that the United Kingdom will start trading with all countries on the basis of WTO rules from April 2019 onward. This would imply that all UK imports and exports will be subject to most-favored-nation (MFN) duties. In the present paper, we examine the tariff impact of a hard Brexit and show that neither better trade agreements with non-European countries nor joining EFTA can compensate for worsened access to the EU market. Assuming that the UK will introduce tariffs according to the currently applied MFN schedule of the European Union, our findings reveal that both British exports and imports would face substantial tariffs. In total, we estimate a quadrupling of duties on UK imports to $21.1 billion and $13.9 billion on exports. Assuming imports from the EU and countries that currently have an FTA with the EU will not change, British Customs would collect an additional $300 million per week after a hard Brexit.