The government is attempting to avert tariffs, set to come into effect on 2 April, through “intense negotiations” with US counterparts, Keir Starmer added
The UK will not be “plunging into a trade war” with the US over Donald Trump’s plans to impose 25% import taxes on cars entering America, the prime minister has said. The government is attempting to avert tariffs, set to come into effect on 2 April, through “intense negotiations” with US counterparts, Keir Starmer added.
The PM’s comments come amid concerns tariffs could upend global motor trade and supply chains, with one of the biggest UK-based exporters to the US, Jaguar Land Rover (JLR), in line to be one of the manufacturers most affected. Trump has argued the measures will lead to “tremendous growth” for the car industry, promising it would spur jobs and investment in the US.
But Starmer said the tariffs were “very concerning”, adding that the government would be “pragmatic and clear-eyed” in its response. “The industry does not want a trade war, but it’s important that we keep all options on the table,” he added.
UK car exports are worth about £7.6bn per year, and the US is the second largest market for UK cars after the European Union, according to car industry body the Society of Motor Manufacturers and Traders (SMMT).
There are about 198,000 people directly employed in the UK car industry, and it supports about 813,000 jobs in the wider economy, it said. All of the major car makers in the UK have foreign owners.
JLR, which is owned by Indian conglomerate Tata Motors, said the company was “waiting for further information” on the tariffs. Meanwhile, the founder of car parts firm Unipart said the tariffs would push people around the world towards buying Chinese-made cars.
The Trump administration plans to impose 25% taxes on imports of cars from 2 April. Taxes on parts are set to start in May or later. The latest move threatens to widen the global trade war and is part of the president’s drive to protect American businesses and boost manufacturing within the US.
Tariffs are taxes charged on goods imported from other countries. Those costs could then be passed onto consumers through higher prices, encouraging Americans to switch to US-built vehicles.
It may also force firms to manufacture and invest in the US. “If you build your car in the United States there is no tariff,” Trump has said. But the approach has been questioned by a number of economists, who argue it will push up inflation. In the UK, the SMMT said the announcement of the tariffs by Trump on Wednesday were “not surprising but, nevertheless, disappointing” but called on both governments to strike a deal.
Its chief executive, Mike Hawes, said 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”. The UK government is in talks with the US administration and remains hopeful of a trade deal before tariffs come into force.
Duncan Edwards, chief executive of BritishAmerican Business, a group representing transatlantic firms, said there was a “very strong case to be made” that the UK should be free from all US tariffs.
“Unlike other trading relationships, the US and UK do not have a trade imbalance, nor is there a significant disparity in wage structures or labour standards and if anything, the UK is at a disadvantage with its higher energy costs,” he said.
John Neill, the founder of Unipart and the firm’s former executive chairman, said the Trump tariffs were “a gift to the Chinese car industry”, because international consumers would respond to a trade war by buying Chinese alternatives. He added the tariffs could have “unintended consequences”. “The Americans may think they’re boxing the world car industry out of the US, but the reality is they are going to box the US car industry out of the world,” he said.
JLR is the most exposed UK-based car firm to Trump’s tariffs, according to Ibisworld analyst Yusuf Allinson. He said the tariffs “represent a grave danger to a UK car manufacturing sector in transition” as firms retool factories for electric vehicles.
Allinson added that it would be “extremely difficult” for UK car firms to find alternative markets because the “sector is saturated”. “UK-made vehicles are already exported globally, so creating new demand to replace falling US volumes will be a challenge,” he said. He added that the UK could respond with retaliatory tariffs on Tesla, which is currently the most popular electric vehicle sold in the UK, selling more than 50,000 cars per year. Tesla, which is owned by Elon Musk, will not be “unscathed” by tariffs, the billionaire and Trump advisor wrote on X. “The tariff impact on Tesla is still significant,” he said.
