Donald Trump has just announced a 25% tariff on all cars imported into the U.S., dealing another blow to the UK economy.
The new tariffs will take effect on April 2, with charges on imported vehicles starting the next day. Tariffs on car parts will follow in May or later.
Speaking from the Oval Office, Trump said, “What we’re going to be doing is a 25% tariff for all cars that are not made in the United States.” The move ramps up his ongoing trade war and could hit the UK hard—America was the biggest buyer of British cars last year, with the UK exporting £6.4 billion worth of vehicles across the pond.
The timing couldn’t be worse for the UK, where economic growth forecasts have already been slashed. On the same day as Trump’s announcement, Chancellor Rachel Reeves revealed deep cuts to benefits to balance the budget and boost defence spending. Meanwhile, the Office for Budget Responsibility (OBR) warned that these new tariffs could completely wipe out the UK’s financial wiggle room.
Andrew Griffith, the Shadow Trade Secretary, didn’t hold back, calling the situation “concerning” and blaming the government for not securing a better deal. “Labour have dropped the ball here,” he told The Telegraph. "This Government has never laid out a plan, took too long to get round the table with Trump and, as of now, they have nothing to show for it.”
What Happens Next?
The UK is still trying to negotiate a way out of the tariffs. Trade Secretary Jonathan Reynolds recently flew to Washington to discuss an “economic deal,” but he couldn’t even secure an exemption from Trump’s earlier steel tariffs. Prime Minister Keir Starmer has also been in talks with the U.S. president, but so far, there’s no clear breakthrough.
One rumoured option is that the UK could scrap its digital services tax—a charge on big tech companies like Google and Amazon—to smooth things over with the U.S. But Reeves seems to be against that idea.
The worst-case scenario? If the UK and other countries retaliate, the OBR predicts a hit to the UK economy—GDP could shrink by 0.6% this year and 1% next year. That could force the government into even more spending cuts or tax hikes.
The European Union is also weighing its response. European Commission President Ursula von der Leyen called the tariffs “bad for businesses, worse for consumers equally in the U.S. and the European Union”.
What It Means for the Auto Industry
British carmakers are bracing for impact. Mike Hawes, CEO of the Society of Motor Manufacturers and Traders (SMMT), called the tariffs “not surprising, but nevertheless disappointing.” He stressed that the U.S. and UK auto industries have a strong history and should be working together instead of throwing up trade barriers.
“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.” Hawes said.
Trump, however, insists this is all about boosting American car production. “I think our automobile business will flourish like it's never flourished before,” he said.
And this might just be the beginning—next up on Trump’s tariff list are computer chips, pharmaceuticals, copper, and lumber. Buckle up.
