Scrapping EU tariffs on foreign imports after Brexit would do little to cut the cost of a weekly shop in the UK, according to a report.
In new research contradicting Brexiters’ claims that leaving the EU could lower the price of food on the shelves, the Institute for Fiscal Studies thinktank said consumers would see little benefit from the removal of trade tariffs, which are a form of tax applied on imported goods.
Designed to protect domestic industry and agriculture – although sometimes criticised for driving up the cost of consumer goods – import tariffs on goods arriving in Britain are currently dictated by Brussels as part of the UK’s membership of the EU customs union.
Leaving the EU gives the government an opportunity to set an independent trade policy and to cut the tariffs charged on imports, which Brexit backers have said would make the UK more competitive and benefit consumers.
However, the IFS said the removal of these tariffs would reduce prices by as much as 1.2% overall. That would fail to offset the 2% increase in consumer prices caused by the sudden drop in the value of the pound after the Brexit vote, which has put pressure on household budgets and led to a slowdown in spending on the high street.
The report is likely to reignite debate over the shape of Britain’s post-Brexit trade policy. Labour has called on the government to stay in a customs union with the EU, while the international trade secretary, Liam Fox, and other Brexit supporters want to strike new deals with the rest of the world.
However, the prospect of a global trade war instigated by Donald Trump could undermine Britain’s chances of striking new deals, while campaigners have also warned the government against lowering its health and safety standards to boost trade volumes.
Prof Patrick Minford, who leads the pro-Brexit Economists for Free Trade group of academics, criticised the findings of the IFS report, which was funded by the group UK in a Changing Europe. He said abolishing import tariffs could lower consumer prices by 8% and boost economic output.