Donald Trump’s decision to slap 25% tariffs on foreign car imports and parts may lead to higher prices for UK consumers while businesses could be left on the brink. It’s a scary picture but one that experts across the board have warned of in the weeks leading up to the President of the United States’ decision to go ahead with car tariffs on Wednesday. However, Labour could play a pivotal role in untangling the UK from the mess if it plays its cards right in the coming days and weeks.
Firstly, it is important to note the impact won’t be as keenly felt in the UK as in other markets due to the makeup of Britain’s trading relationship. The Office for Budget Responsibility (OBR) states that UK exports of goods to the US account for just 2% of the UK’s GDP. The latest report showed that the UK sent £8.3billion worth of cars to the US in the 12 months to September 2024.
This is compared to countries like Mexico who exported a whopping $181.billion in cars and parts to the USA.
However, it would be foolish to say the new policy won’t be felt at all by consumers with experts previously warning that customers here could feel knock-on effects.
Mike Thompson, COO at Leasing Options explained those buying luxury vehicles would feel the impact as brands try to offset lost income globally.
Speaking on Thursday, Mike warned: “[It] could push up the price of premium models like BMW, Audi, and Mercedes-Benz here in the UK. These brands rely heavily on sales in the U.S. 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.”
Meanwhile, there is also concern the news could be a blow for wider industry with smaller businesses likely to be left vulnerable.
Martin Schroder, an associate professor at Ritsumeikan University in Japan warned those struggling to meet profit targets could be most at risk.
Although speaking more around the Japanese market, Martin warned the same effects could be felt across the whole industry”.
He said: “I would also expect smaller suppliers to go out of business. Their margins are often razor-thin under ‘normal’ conditions, they simply cannot deal with 25% tariffs.”
The President confirmed the latest tariffs would come into effect on April 2 with fees slapped on parts from around May.
However, Labour could still dodge the full effects of the changes, harnessing the influence of the ‘Special Relationship’ and EU independence to carve a different path for the UK.
Sir Keir Starmer impressed many with the way he handled Mr Trump in the Oval Office last month. Presenting an invitation from the King in front of the cameras while beginning up how a big honour it would be was a sure way to get the President on-side.
Getting a signature on the so-called “economic prosperity deal” between the UK and U.S. before next week may seem ambitious but would likely be a way around the fees.
Trump has proved before that he can act quickly if he wants something and a deal before April 2 may not be impossible if negotiations are as far on as Labour seem to be claiming.
Chancellor Rachel Reeves explained the UK had undergone “intense negotiations” with the U.S. with cars among the topics discussed.
She told the BBC: “[Negotiations have] been ongoing since our prime minister, Keir Starmer, went to the White House to meet the US president just a few weeks ago. Those talks continue.”
