Multilateral trade liberalization and preference erosion: the case of the United Kingdom Global Tariff

We assess the impact of the UK Global Tariff (UKGT) using detailed data on tariffs and imports from 2012 to 2021 to estimate sectoral elasticities of substitution and compute theoretically consistent tariff margins, which incorporate information on multilateral trade resistance. We quantify the impact of the new UK multilateral trade policy by comparing the 2021 trade data with a counterfactual scenario, assuming that tariffs remained unchanged. Our approach exploits cross-product and cross-country variation in treatment over time to identify which countries/sectors are likely to be negatively/positively affected by the UKGT. Distinguishing between final and intermediate imports also allows us to shed light on the UK's role in global value chains. Our results highlight that trade shocks affect all partners, not just targeted exporters, and that changes in trade costs for some influence the competitiveness and trade flows of others.