Defence and export controls remain at the front of the agenda this week, as the US hits a UK defence firm with a substantial fine for controls breaches.
Washington DC also announced further tariffs on Chinese tech imports, this time introducing levies on drones in the name of national security.
Elsewhere, the EU faced strong criticism of the Carbon Border Adjustment Mechanism (CBAM) and the UK received good economic news.
The big picture: The US has continued to impose trade measures on China and advanced technology imports, as the two countries’ tit-for-tat trade dispute continued to move into the sphere of defence and technology.
Yesterday (13 August) the White House announced a levy on imported drone technology and their components.
Drones weighing over 25kg which include thermal imaging technology will be subject to a 100% tariff, while those under 25kg will be subject to 25% rates.
The move is designed to tackle models and capabilities that “are particularly sensitive for national security purposes”, including drone docking stations and “critical components of those drones”.
Speaking to the FT, senior fellow at the Foundation for Defense of Democracies, Craig Singleton, explained that the tariffs were designed to extend a prohibition on imported Chinese drones introduced by the Federal Communications Commission, which announced it would stop approving wireless communications for the technology in December 2025.
Singleton said that the tariffs close a “backdoor” through which companies could still import the constitute parts of drones – “motors, rotors and frames” – from China and then build them in the US.
It’s worth noting that Beijing curbed exports of the same tech to the US last week, retaliating against US measure prohibiting imports from 43 Chinese firms.
Last week the US applied a 15% tariff rate to all imported products made from polysilicon – a key material involved in the manufacture of solar panels and semiconductors – and a market in which China leads.
The rate was introduced amid growing competition between the US and China’s AI sectors, and led the Chinese embassy in Washington to accuse White House of “abusing state power to go after Chinese businesses”.
Good week/bad week: A good week for the UK economy which grew 0.4% in Q2, according to the latest Office for National Statistics data.
Warm weather and the FIFA World Cup were described as growth factors, with both manufacturing and services performing well over the quarter.
The good news didn’t come without caveats – economists have warned that inflation is likely to rising over the coming months, along with unemployment.
Meanwhile, Starmer loyalists used the opportunity to tout their own record in government, and warned the new Andy Burnham administration not to waste a “strong economic inheritance” by announcing tax and spend plan at his first Autumn Budget.
UK defence company BAE systems faces a hefty fine for over 100 violations of US export control rules.
The company must pay a US$36m penalty for 104 breaches of the US Arms Export Control Act 1976 and the International Traffic in Arms Regulations.
By volunteering all but one breach to the US State Department, the company lowered the cost of the fine. It also negotiated the suspension of half the penalty (US$18m) by agreeing to spend it on enhancing its compliance controls.
In a statement, BAE Systems said:
“We have been working diligently to implement improvements to our BAE Systems Inc compliance programme over the last several years, and we will continue to do so. We take seriously our responsibility to protect critical information and support all our customers’ security.”
How’s stat? US$4m. That’s how much one ship paid to jump the queue and transit through the Panama Canal.
The Guardian reports that ships are waiting around 10 days to pass through the key maritime chokepoint, as disruption to Middle East shipping stemming from the Iran war is changing trade habits.
The Panama Canal Authority runs auctions enabling ships to secure and earlier transit slots, although the US$4m bid was reportedly more than double the average bid made in the previous week.
We covered the impact of climate and geopolitical disruption to global trade chokepoints, including the Panama Canal, in this member-exclusive feature.
Quote of the week: “It is non-discriminatory, WTO-compatible, and applies equally to all third countries based on verified embedded emissions, irrespective of origin.”
That was the European Commission defending EU CBAM, following criticism from US ambassador Andrew Puzder.
Puzder accused Brussels of operating a “double standard” in a strongly worded FT op-ed this week that drew similarities between the outcomes of US tariffs on imported steel and aluminium and Brussels’ tax on high-polluting imports, such as those same metals.
The week in customs: Traders have been notified of upcoming changes to two Inland Border Facilities (IBF) operating in the UK: Sevington and Holyhead.
The IBFs are set to switch to a commercial operating model from 2027, with our technical director Anna Doherty telling those using the Sevington IBF that the process by which their goods are checked when entering the UK may change:
“There is also a risk that, if you have a consignment subject to customs checks, it would need to first be presented at Folkestone or the Port of Dover, and then moved to Sevington for SPS checks while that site is still operational.”
What else we covered: There was an in-depth review of rules and obligations inherent in the EU’s Packaging and Packaging Waste Regulations, which came into effect on Wednesday (12 August).
Our latest member-exclusive Trade Digest covered recent trade news from South America. That included a look at the fallout from the earthquake in Colombia and the upcoming Brazilian presidential election, in which trade will feature heavily.
With a new UK duty regime for vaping products set to come into effect from October, businesses can learn more about that means for them in this explainer.
True Facts: University of Reading master’s student Maha Khan created a chocolate bar grown entirely from UK-produced ingredients, including cocoa grown at the university.
It’s the first time the feat has been achieved in almost 100 years, after iconic confectionery-maker Rowntree gave a young Queen Elizabeth II such a bar.
Khan, who studies food security, said she pursued the project to highlight how much of the cocoa supply chain is currently under threat from climate change.
Worth £10.4bn, the UK’s chocolate industry is entirely dependent on imported cocoa.
