Importance Score: 75 / 100 🔴
New 25% car import tariffs imposed by the United States could prove detrimental to UK-based automotive manufacturers and consumers, according to industry experts. Analysis by Auto Trader indicates that producers are “likely to increase prices” to offset the impact of the additional levies from the US.
Tariffs Impact on UK Car Market
Experts emphasize that these tariffs “won’t assist” the UK automotive sector, advocating for alternative strategies to foster a “prosperous car market.” The tariffs, implemented by the President on Wednesday, aim to stimulate domestic car manufacturing in the United States. Vehicles manufactured outside the US and sold within the country will face supplementary charges, costs that are expected to be passed on to consumers.
Industry Expert Concerns
A senior executive at Auto Trader cautioned that automotive manufacturers must “compete and thrive” in the global market. According to the Commercial Director, tariffs are “detrimental for producers and are highly probable to inflate costs for buyers.”
He further stated, “The UK requires a flourishing car market, and tariffs will not be beneficial. Different approaches should be contemplated to guarantee that manufacturers can effectively compete and prosper globally, especially as they already operate under stringent regulations in numerous international markets.”
Potential Production Slowdowns
Manufacturers lacking production facilities within the United States may experience the most significant repercussions from these tariffs.
It is anticipated that escalating tariffs could lead companies to decelerate the manufacturing of vehicle models destined for the US market.
Wider Economic Impacts
Beyond a decline in potential income, this policy shift could generate subsequent adverse effects, including potential job reductions. The Office for Budget Responsibility (OBR) previously highlighted that UK goods exports to the US represent only 2% of the UK’s total GDP.
Risk of Trade War and Market Instability
Notably, the UK exported £8.3 billion worth of automobiles to the US in the year leading up to September 2024. Analysts at UBS suggest that the current tariffs initiated by the US administration may signal the beginning of broader trade disputes, potentially triggering “market volatility” if Western nations engage in a full-scale trade war.
UBS analysts further cautioned, “These tariffs could also unsettle supply networks, discourage investments, and considerably increase consumer costs, while also having the potential to initiate trade conflicts with Europe, Japan, and South Korea.”
“A substantial expansion of tariffs is still anticipated, potentially leading to a cycle of retaliatory measures and heightened market instability in the near future.”