Tariffs: Trade tools or policy Swiss army knives?

KPMG International convened a roundtable discussion in July 2025, as part of its Global Responsible Tax Program, to explore the evolving role of tariffs in modern policymaking.

Tariffs have traditionally been viewed as instruments of trade policy — tools to manage imports, protect domestic industries and influence market dynamics. But today, they are being used for a broader range of goals, including national security, industrial strategy and geopolitical positioning. As governments around the world explore how to shape their economies in a more uncertain global landscape, tariffs are increasingly serving multiple, sometimes competing, purposes.

This broader use brings new challenges. While tariffs can offer short-term protection or leverage, they also introduce higher costs for businesses and consumers. Perhaps more significantly, when tariff policy is unpredictable (changing in scope, duration or application), it becomes difficult for businesses to plan investment, manage supply chains or price goods. Uncertainty itself becomes an economic risk, with implications for employment, growth and monetary policy.

The discussion brought together experts from law, business, research and policy under the Chatham House Rule. The write-up below summarizes the personal views of participants and does not necessarily reflect the views of any particular organization, including KPMG.

From revenue to reshoring — blurring their purpose and muddying the policy water.

Participants broadly agreed that the use of tariffs has expanded beyond traditional trade objectives. Originally intended to manage imports and protect domestic industries, tariffs are now serving diverse purposes: national security, climate resilience, industrial strategy and political leverage.

One speaker noted that while tariffs remain a small share of total government revenue, their symbolic and strategic value has grown. Another added that their sectoral application — targeting items like electric vehicles or semiconductors — highlights how tariffs are being wielded as tools of statecraft.

However, this repurposing introduces serious costs: higher prices, operational disruption and an overall drag on global efficiency. Participants warned that uncertainty over timing, scope and legal status of tariffs can paralyze business decisions and distort markets.

The global trade system is straining under legal ambiguity and weakened institutions.

Multiple speakers expressed deep concern over the fraying of the WTO and the legal scaffolding that underpins international trade. The collapse of the WTO’s dispute settlement mechanism, coupled with the broadening use of national security exceptions (e.g., Article XXI of the General Agreement on Tariffs and Trade) has rendered many trade commitments toothless.

One legal expert warned that these trends mark a restructuring of the global trade order, not just a temporary deviation. Without reliable adjudication, rules-based trade is becoming more notional than real.

The UK’s own trading posture was also scrutinized. Although entering into multiple trade agreements post-Brexit, these often fall short of true free trade deals. As one participant put it, "We’ve settled for managed trade, not free trade."

For businesses, the unpredictability of tariff regimes is more damaging than the tariffs themselves.

Participants from the business world reported immediate impacts from tariff swings. One cited a UK-based firm that lost Formula 1 contracts due to unexpected US tariffs, while another noted significant cost increases across the tech and automotive sectors.

The lack of consistency — across countries and administrations — makes long-term planning extremely difficult. Some participants suggested that businesses are increasingly “pricing in” geopolitical risk and focusing on agility rather than optimization.

Diversification is emerging as a central theme. British firms, for example, are looking beyond traditional US or EU markets to the Asia-Pacific region, even as the commercial payoff remains modest. “The willingness to diversify is there, even if the infrastructure and incentives aren’t,” one participant remarked.

If this is the new normal, people need help understanding it

A recurring theme was the need for more accessible, trusted information about how tariff policy is evolving and why. One speaker suggested creating public education resources that map out the changing legal landscape (particularly the uses and limits of trade law provisions like national security exceptions).

Participants agreed that demystifying trade policy would not only support better public debate but also equip businesses and policymakers to navigate complexity more effectively.

Contributors

• William Bain, Head of Trade Policy, British Chamber of Commerce
• Catherine Barnard, Professor of EU and Employment Law, University of Cambridge
• Gabrielle Galdino-Glaeser, Associate, Baker & McKenzie Services
• Peter Levell, Deputy Research Director, Institute for Fiscal Studies
• Chris Morgan, Global Leader for the KPMG Responsible Tax Program, KPMG International
• Becky Holloway, Programme Director, Jericho
• Neal Lawson, Partner, Jericho