US president Donald Trump has announced a major reduction in tariffs on UK car and metal exports, easing transatlantic trade tensions and offering a potential boost to British manufacturers.
Effective immediately, the tariff on UK car imports into the US has been cut from 27.5% to 10%, although the lower rate will only apply to the first 100,000 vehicles exported annually.
Last year, UK manufacturers exported 101,000 vehicles to the US, meaning the majority of UK car exports will benefit from the reduced rate.
The US has also scrapped its 25% tariff on UK steel and aluminium, in a further concession welcomed by industry. In return, the UK Government confirmed it will lift its tariff on US ethanol imports and has agreed to reciprocal market access on beef.
The agreement comes just a month after the US tariffs came into force in April, prompting concern among UK carmakers and officials. That initial decision had been described as “deeply disappointing” by the UK automotive industry.
Speaking during a visit to the Jaguar Land Rover plant in the West Midlands, Prime Minister Keir Starmer said the agreement represented a vital win for British industry.
“This deal means US tariffs will be cut from 27.5% down to 10% for 100,000 vehicles every year. That’s a huge and important reduction,” he told plant workers.
Sector lifeline
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), welcomed the move as a lifeline for the sector.
“The application of these tariffs was a severe and immediate threat to UK automotive exporters so this deal will provide much needed relief, allowing both the industry, and those that work in it, to approach the future more positively,” said Hawes.
“Government has recognised the importance of the automotive industry to UK exports and the wider economy and has worked quickly and tirelessly with US counterparts to strike an agreement.
“We hope that it will lead to broader and deeper cooperation that reduces barriers to trade still further, charting a path to economic growth for both nations.”
Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA) welcomed the agreement: “This is a positive step that brings much-needed reassurance to businesses involved in transatlantic trade, including many of our dealer members and their manufacturing partners.
“Lower tariffs will help enhance the competitiveness of UK-built vehicles in the US market, support long-term investment, and streamline the flow of goods across borders. We are optimistic about the benefits this will bring to dealers, manufacturers, and consumers alike.
“The agreement comes at a pivotal moment for the industry, which continues to face pressures from inflation, evolving regulations, and the shift to zero-emission vehicles. Greater certainty and a stable trade environment will be essential in helping the sector plan for the future.”
Little wiggle room
Lee Swinerd, head of automotive at advisory firm Interpath, said the agreement marks a broadly positive step for UK car makers, particularly in light of wider international trade efforts.
“The US trade deal is, overall, good news for the UK automotive industry. While the 100,000 car quota doesn’t leave much wiggle room for the industry to grow, it should see a return to a more normal flow of product from our key manufacturers,” he said.
Swinerd pointed out that the agreement follows progress on a staged deal with India, expected to cut tariffs on UK-made cars. However, he cautioned that the benefits may be unevenly distributed.
“The wider UK supply chain will be stuck in neutral as so many of our component suppliers are heavily integrated and reliant on the European-based OEMs, which continue to fall under the spectre of the sweeping trade tariffs,” he explained.
“This indirect impact will likely lead to a decline in demand for many components businesses in the UK, squeezing margins and forcing them to either absorb higher costs or pass them onto customers amidst unstable order patterns, further undermining competitiveness.
“In an industry where long-term planning and investment are critical, the general uncertainty facing the wider economic landscape will still filter right through the complex, global automotive supply chain.”
Dom Tribe, PwC UK’s automotive sector leader, agreed that the impact of the deal may vary significantly across the industry. While premium brands stand to benefit, he cautioned that the picture could be less positive for some manufacturers.
Volume competitive concern
In particular, he warned that mass-market vehicle makers, where pricing is a more sensitive factor, could see sharper declines in competitiveness and volumes in the US, “especially if tariffs are decidedly passed on to drivers – which could lead consumers to keep their cars longer or buy second-hand, impacting customer loyalty and profitability for OEMs,” he explained.
Tribe added that car makers are likely to assess their response carefully: “There is still an inflection point on a case-by-case basis as to how much automotive companies can or will be willing to flow price increases through to consumers. If tariff rates are deemed low enough, it may mean that OEMs will not look to make drastic changes to their manufacturing footprint and supply chain networks but look at other cost avoidance or reduction measures which might be able to offset some, or all, of the price uplift.”
Aidan Rushby, founder and CEO of car finance platform Carmoola, noted that the deal should help stabilise prices in the used car market.
“For UK car buyers, prices in the nearly-new and used car market should remain steady rather than dropping sharply, as was predicted when Trump’s tariffs were initially announced,” he said.
“That’s good news for existing car owners who won’t have to worry about their vehicle losing value too quickly, but those hunting for a bargain may see fewer discounted options.”
Philipp Sayler von Amende, chief commercial officer at online car marketplace Carwow, described the tariff deal as “a significant relief ” for the UK automotive sector and said attention will now shift to Europe, where French, German, and Italian manufacturers remain fully exposed to the 25% levy.
“Brussels will be under increasing pressure to secure a similar deal to keep EU exports competitive in the US,” he said..
The deal comes as the Bank of England cut interest rates to 4.25% offering the prospect of increased stability that could support more accurate long-term forecasting and planning.