This week, President Trump announced an enormous 25% tariff on the import of cars, which could effectively mean a £2 billion penalty for the UK car industry.
The tariff is effective almost immediately on car imports from all over the world, officially being introduced April 2nd. There will also be a 25% tariff on car parts, which is due to be applied during May.
The president suggested that the measures will provide “tremendous growth” for the US car industry. A theory that is not agreed by all analysts, with some suggesting the levy could actually hinder US car production.
Cars are the UK’s highest revenue product being exported to the US and last year they accounted for £8.2 billion worth of trade. Theoretically, a 25% tariff on that number would result in around £2 billion in duty charges being added overnight.
While the impact on the UK’s car industry will be significant, the UK is only sixth in the list of countries that sell cars to the US and the impact on Mexico, Japan, South Korea, Canada and Germany will be far greater in the long term.
However, we understand that the collection of the levy for imports from Mexico and Canada is a potential sticking point and they could temporarily be exempt.
Another concerning statistic is that the US is currently the biggest importer of cars from the UK – over 18% of UK’s car exports currently ship to the US.
In response to the tariff announcement, Germany has asked the EU to “respond firmly” and other world economies have vowed to retaliate. Canada have called the move a “direct attack”, while China has accused the US of violating international trade rules.
UK government has said it will “not be jumping into a trade war” with the US and will take a “different approach” to other countries when negotiating tariffs with the US.
