This work analyses the trade relations in goods and services between the EU and the United Kingdom (UK) in the light of Brexit, taking into account international production chains. The worst-case Brexit scenario is considered, i.e. the case in which no trade deal is signed and trade between the EU and the UK is conducted under WTO most-favoured-nation terms. The study investigates the effects of introducting tariffs on production costs and on trade barriers.
Assuming that a trade agreement is not reached, total tariffs would be higher for UK imports from the EU than for EU imports from the UK by around 2 percentage points, also taking into account global value chains. The input costs would rise by almost 1 percentage point in the UK, while the increase would be only 0.1 percentage points for those in the EU.
