US President Donald Trump has made good on his threat to impose a 25% tariff on all foreign car and van imports in a move aimed at strengthening America’s domestic manufacturing.
The new “permanent” tariffs, set to take effect on April 2, mark a significant increase from the current 2.5% levy.
Speaking from the Oval Office on Wednesday, Trump framed the decision as a victory for American industry. “This is the beginning of Liberation Day in America,” he declared. “If you build your car in the United States, there will be no tariff.”
The policy shift is expected to have broad implications, particularly for countries that export large numbers of vehicles to the U.S. Mexico currently leads in car exports to the U.S., followed by South Korea, Japan, Canada, and Germany. The European Union has already signalled its intent to consider retaliatory tariffs in response.
“As I have said before, tariffs are taxes – bad for businesses, worse for consumers equally in the US and the European Union,” European Commission President Ursula von der Leyen stated. “The EU will continue to seek negotiated solutions while safeguarding its economic interests.”
Trump has previously imposed a 20% import tax on goods from China and a 25% levy on steel and aluminium imports. Additionally, he has threatened and delayed tariffs on Canada and Mexico, citing their alleged role in allowing fentanyl into the U.S.
“This is permanent,” Trump said. “But if you build your car in the United States, there is no tariff.”
The Office for Budget Responsibility (OBR) has warned that Trump’s escalating tariff threats could have economic repercussions.
In a newly published economic forecast, the OBR outlined a worst-case scenario in which retaliatory tariffs from the UK and other nations could shrink GDP by 0.6% this year and 1% in 2026 which could significantly impact UK fiscal planning.
“…if global trade disputes escalate,” it noted, “to include 20 percentage point rises in tariffs between the US and the rest of the world this could reduce UK GDP by a peak of 1 per cent and reduce the current surplus in the target year to almost zero.”
Although in terms of export car volume the US is far behind the European Union, which takes 54% of the cars UK factories export, it does account for 17% of our new car exports which makes it the second most significant market for UK car plants, ahead of China which takes 6.6%.
The UK is one of the largest suppliers of luxury vehicles to the US with brands like Bentley, Rolls-Royce, Jaguar Land Rover and Aston Martin targeting wealthy American customers.
Last year, British car exports to the US amounted to around £8.3 billion, equating to about 100,000 vehicles.
Chancellor Rachel Reeves, responding to Trump’s announcement restated the UK’s commitment to free trade. “Increased tariffs between our economies will damage both our economies,” she said at a press conference following the Spring Statement. “Let’s see where we get to in the next few weeks,” she added, referring to ongoing negotiations between the UK and US.
Mike Hawes, chief executive os the Society of Motor Manufacturers & Traders (SMMT) brsnded President Trump’s move as disappointing if additional tariffs were to apply to UK-manufactured cars.
“The UK and US auto industries have a long-standing and productive relationship, with US consumers enjoying vehicles built in Britain by some iconic brands, while thousands of UK motorists buy cars made in America.
“Rather than imposing additional tariffs, we should explore ways in which opportunities for both British and American manufacturers can be created as part of a mutually beneficial relationship, benefitting consumers and creating jobs and growth across the Atlantic. The industry urges both sides to come together immediately and strike a deal that works for all.”
Commenting on the move, Mike Thompson, COO at Leasing Options, said the 25% auto tariff on foreign cars could push up the price of premium models like BMW, Audi, and Mercedes-Benz in the UK.
“These brands rely heavily on sales in the US market, so if tariffs increase their costs there, they’ll likely recover some of those losses by raising prices in other markets. That could leave UK drivers facing higher costs when buying outright.”
“We might also see shifts in availability. If manufacturers need to rework their supply chains or adjust how they allocate stock globally, there could be a shortage of certain models in the UK. For example, brands like BMW might prioritise sending electric models such as the i4 or iX to markets with fewer trade barriers, potentially limiting their availability here.
“This is particularly concerning as the UK approaches its 2035 zero-emissions target. The Zero Emission Vehicle (ZEV) mandate requires manufacturers to sell an increasing percentage of EVs, but global disruptions could make it harder to meet these targets and secure the EVs needed to achieve ambitious goals.”
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