British car manufacturers could face a devastating drop in sales after Donald Trump said he intends to impose auto tariffs “in the neighbourhood of 25%” on vehicles imported by America.
The US President said the tariffs could come into force as early as 2 April – the day after members of his cabinet are due to deliver reports to him on options for a range of import duties.
The move comes after Trump repeatedly condemned the unfair treatment of US automotive exports in foreign markets.
The UK Treasury is understood by The i Paper to have conducted “extensive planning” for Washington imposing levies on key UK industries, including the auto sector, ahead of an announcement.
Cars represent the biggest single export segment for UK exports to America, last year accounting for £8.3bn of sales, or about 100,000 vehicles.
The i Paper revealed on Sunday that luxury British marques such as Bentley, Rolls-Royce, Jaguar Land Rover and Aston Martin, who all sell substantial numbers of cars to wealthy US customers, could be among those hardest hit.
The tariffs are expected to increase supply chain costs, which ultimately means drivers will end up paying more for these cars.
Modelling by Oxford Economics, a leading economic forecasting think-tank, suggests that UK vehicle exports could drop by more than 7 per cent as a result of the tariffs.
The UK’s drop in exports, forecasted to be -7.04 per cent, would be second only to Germany (-7.07 per cent) among European countries, who will also be taxed.
Any drop in sales and production could threaten thousands of jobs in manufacturing centres, such as the West Midlands.
An auto import tariff would also be a game-changer for a global auto industry that is already reeling from uncertainty caused by levies threatened by the US administration.
A similar drama played out in 2018 and 2019 during Trump’s first term, when the Commerce Department conducted a national security investigation into auto imports and found that they weakened the domestic industrial base.
Trump had threatened car tariffs of 25% at that time, but ultimately took no action, allowing the tariff authority from that probe to expire.
Trump also said on Tuesday that sectoral tariffs will likely be levied on pharmaceuticals and semiconductor chips in April.
“But we want to give them time to come in,” he added. “Because as you know when they come into the United States and they have their plant or factory here, there is no tariff. So we want to give them a little bit of a chance.”
Trump has also said that 25 per cent tariffs will be levied on all imported steel and aluminum, beginning on 12 March.
Last week, the US President directed his economic team to devise plans for reciprocal tariffs on every country that taxes US imports.
Since his inauguration, Trump has imposed a 10 per cent tariff on all imports from China, on top of existing levies.
He also announced, and then delayed for a month, 25 per cent tariffs on goods from Mexico and non-energy imports from Canada.