Britain’s car industry said the move would be ‘a blow to a long-standing and productive relationship’
Donald Trump has said he is placing 25 per cent tariffs on all foreign car imports in order to boost domestic trade, prompting warnings from Britain’s car industry.
The current tariff is 2.5 per cent while most almost half of all cars sold in the US are imported.
“The beauty of the 25 [per cent] is it’s one number. And that number is going to be used to reduce debt greatly in the United States,” the US president said at a White House press briefing.
“This is the beginning of Liberation Day in America,” he said. “If you build your car in the United States there will be no tariff.”
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), warned the move risks hurting both UK and US manufacturers and consumers.
“If, as seems likely, additional tariffs are to apply to UK-made cars, it’s a blow to a long-standing and productive relationship,” he said.
“US consumers enjoy vehicles built in Britain by some iconic brands, while thousands of UK motorists buy cars made in America.
He called on both sides to “come together immediately and strike a deal that works for all”.
Trump has announced and delayed tariffs on Canada and Mexico for what he alleges is their role in allowing the opioid fentanyl into the US.
The US president has also set 20 per cent import taxes on goods from China and introduced a 25 per cent levy on imports of steel and aluminum.
The new tariffs will come into effect on 2 April and will apply to all finished car and truck imports.
Mexico is the largest exporter of cars to the US, followed by South Korea, Japan, Canada and Germany.
Ahead of Trump’s decision, South Korean carmaker Hyundai unveiled $21bn (£16.3bn) in investment in the US, including a $5.8bn (£4.5bn) steel plant in Louisiana.
“This is permanent,” Trump said regarding if the tariffs could be reversed. “But if you build your car in the United States there is no tariff.”
The EU has already said it would consider reciprocal tariffs due to the decision.
“As I have said before, tariffs are taxes – bad for businesses, worse for consumers equally in the US and the European Union,” European Commission president Ursula von der Leyen said.
“The EU will continue to seek negotiated solutions, while safeguarding its economic interests.”
The Office for Budget Responsibility said Trump’s tariff threats could force Rachel Reeves to raise taxes this year.
In its economic forecast published on Wednesday, the OBR said the most “severe” scenario, in which the UK and other nations retaliated to the imposition of tariffs, would see GDP 0.6 per cent lower than forecast this year and 1 per cent lower next year.
This scenario would also “almost entirely eliminate” the Chancellor’s £9.9bn headroom against her fiscal rules, potentially forcing her to implement further spending cuts or tax rises.
Talks between the UK and US on avoiding tariffs remain ongoing, with Trade Secretary Jonathan Reynolds visiting Washington last week to discuss an “economic deal”.
At a press conference on Wednesday, Rachel Reeves said the Government would continue to make the case for “free and open trade” with the Trump administration, warning that “increased tariffs between our economies will damage both our economies”.
She added: “Let’s see where we get to in the next few weeks.”
Economists have said tariffs on goods not related to UK goods may they threaten to increase prices for UK consumers because they can weaken the pound against the dollar – making imports more expensive.
With agencies