America is the second biggest single market for UK-made cars, with more than 100,000 vehicles shipped to the States last year
US President Donald Trump has sent shockwaves around the world again, this time by announcing a 25% tariff on all cars imported to the States.
The move threatens to escalate a global trade war, especially if, as expected, other countries retaliate. But what does all this actually mean, and how could we in the UK be impacted?
What has Donald Trump announced?
A blanket 25% tariff on all foreign-made cars, as well as certain automotive parts. As it stands, the levy hike will come in force from April 2 on cars and May on parts.
The biggest single impact is on Mexico, which sent nearly 2.8 million cars to the States last year and where around million people are employed in the sector, and Canada. But the fall-out will hit manufacturers around the world.
The US imported roughly eight million cars last year, and almost half of vehicles sold in States are foreign. The value of those imports is put at around £186billion, but that rises to almost £370billion once parts are included. As well as Mexico and Canada, the other countries facing a big hit are Japan, South Korea, Germany and the UK.
Parts subject to tariffs include engines, transmissions, powertrain parts, and electrical components. The White House threatened to “expand tariffs on additional parts if necessary.”
Why has Trump done it?
It’s just the latest in the President’s use of tariffs to tackle imports which, he claims, are disadvantaging US firms. The White House claims America’s national security had been “undermined by excessive imports threatening America’s domestic industrial base and supply chains.”
Asked if there was any chance he would reverse on the move, President Trump said no, adding later: “This is permanent. If you build your car in the United States there is no tariff.”
”This is the beginning of Liberation Day in America,” Trump said in the Oval Office on Wednesday evening. “If you build your car in the United States there will be no tariff.
That said, tariffs threaten to push up prices for US consumers which, along with other tariffs, could increase inflation. Some experts also warn that the disruption, especially to parts, could actually damage the US automotive industry, rather than help it..
How important is the US to Britain’s car industry?
Trade body the Society of Motor Manufacturers and Traders says the US is the UK’s second largest market for our cars – after the EU – with more than 100,000 vehicles shipped to the States last year. HMRC data shows the value of UK car exports to USA in 2024 was £7.6billion. Among those most exposed to tariffs are luxury car makers such as Jaguar Land Rover, Aston Martin, Bentley, Rolls Royce and BMW owned Mini.
Is there are exemption for the UK?
No, certainly not at this stage anyway. It’s possible one could be agreed, but it is less than a week until the tariffs kick in. What’s more, the UK hasn’t escaped Trump’s global tariffs on steel imports. The UK government will doubtless up pressure on the Trump administration, but the chances are slim at this stage.
What could be the impact on the UK?
Firstly, it’s not UK car makers that would pay the tariff, rather it would be the firm importing our vehicles. However, slapping the levy on UK-made cars makes them more expensive for buyers, assuming some or all of the extra cost is passed on. And we are talking about cars that are already pretty expensive in many cases.
With £7.6billion worth of exports, a 25% tariff could amount to £1.9billion. Put another way, it could add an extra £18,750 to the cost of a £75,000 motor. That might make even deep pocketed American buyers to think twice. And if demand is reduced, that impacts production at UK car plants – and their army of suppliers – which in turn threatens jobs and investment.
There is also the knock-on impact for the already dangerously weak UK economy. The Office for Budget Responsibility this week warned that a global trade war – not just on cars – could wipe out Chancellor Rachel Reeves’ £9.9billion of wiggle room, increasing the risk of further tax rises and spending cuts. Richard Hughes, head of the OBR, said: “The UK’s exports of goods to the US account for about 2% of GDP (gross domestic product), car exports are about 10% of that. What Trump announced overnight is not the whole of that worse case scenario but it is the beginning of that risk.”
