Mark your diaries for what may be one of the less jovial contenders for a new national holiday in recent history. On the 2nd April, a date branded as ‘Liberation Day’ by President Donald Trump, the United States will impose sweeping 25% tariffs on imported cars and automotive parts.
The controversial measure aims to revitalise domestic manufacturing, a cornerstone of Trump’s ‘America First’ strategy, but it’s a move that will hit both partner and competing economies hard – including the UK’s carmakers.
How will the UK automotive sector be impacted?
The UK automotive sector, having just regained its feet after Brexit, and the pandemic, and surging energy prices, is going to be hit hard. Jaguar Land Rover is especially exposed as it exports 100% of its US sales with no state-side manufacturing base. Vehicle prices will rise, curbing consumer demand across the Atlantic and risking profitability for one of Britain’s iconic luxury carmakers.
According to industry analysts cited by The Independent, the UK automotive sector could see costs increase substantially, putting thousands of jobs at risk across manufacturing hubs in the West Midlands and North East of England.
Other car giants around the world which are particularly exposed include Volvo, Mazda, VQ, Hyundai and the German saloon giants too.
Impact beyond UK borders – the global automotive tidal wave
The tariffs will also cause some collateral damage. Major manufacturers such as Tesla and Ford heavily rely on international supply chains, sourcing parts from China and other global manufacturing hubs. The US automotive sector, therefore, faces increased production costs, which will inevitably pass down to American consumers, potentially dampening domestic car sales and manufacturing employment – especially for newer vehicles.
Data from industry bodies shows that a typical car manufactured in the US includes approximately 40% imported parts, underscoring the interconnectedness of global automotive production.
UK exemption hopes fading
The UK had previously hoped to secure an exemption from these damaging tariffs, particularly following a notably positive diplomatic visit by Prime Minister Keir Starmer to the White House.
However, the mood music out of Downing Street has darkened and it looks a though the UK will be lumped in with everyone else when it comes to auto tariff treatment.
Mixed reaction in the USA
In the United States, reaction to the tariffs has been deeply divided. Supporters, primarily from manufacturing regions in the Rust Belt, see tariffs as a necessary measure to restore domestic production capabilities and protect American jobs. Opponents, however, warn that higher tariffs will escalate vehicle prices for US consumers, reduce sales volumes, and potentially trigger job losses across the automotive retail and repair sectors.
Economists warn of broader impacts too, including reduced consumer spending power, increased inflationary pressures, and heightened risks of economic recession – potentially counteracting any intended economic gains from the tariffs.
Short-term and long-term strategies for UK businesses
So, what can UK-based auto firms do? In the immediate term, exporters should brace for disruption. Firms should urgently assess their exposure to US markets, actively monitor pricing strategies, and potentially explore absorbing short-term costs to retain market share. Strengthening supply chain resilience through alternate sourcing and stockpiling critical components will also be prudent, something that US firms have been doing since Trump returned to the White House.
For longer-term stability, diversification remains essential. UK companies heavily reliant on the US as a large percentage of its sales base should actively explore new international markets, particularly in growing economies in Asia and Africa, alongside reinforcing trade partnerships within Europe and Commonwealth countries.
This is a turbulent time for businesses on both sides of the pond. Having honest, open and constructive dialogue with suppliers and customers will be essential.
The good news? Literally everyone is in the same boat. As with Brexit, those who adapt best will be best place to ride out this tide of tariffs and come out swimming on the other side.
