‘We’re not panicking yet’: UK carmakers brace for Trump tariffs

A month before the US election, in front of a thousand people at MotorCity Casino hotel in Detroit, Donald Trump pledged to reinvigorate America’s “collapsing” car industry by championing his plans to impose blanket tariffs on imports.
“Your car industry is going out of business. It’s going out of business,” he told members of the Detroit Economic Club on October 10.
Trump’s protectionist plans may well be designed to prevent China from dumping cheap vehicles on the US market. But UK carmakers now risk being caught up as collateral damage in a global trade war.
Not since 1955 has Britain been the biggest auto producer in the world. But motor cars are still one of the UK’s biggest exports to the US: last year, they represented $6.7 billion of the $72 billion worth of goods imported by the US from the UK, according to the UN Comtrade database.
Most of the UK’s biggest carmakers — the likes of Nissan, Toyota and Stellantis — have factories in the US, making them exempt from tariffs. But six — Jaguar Land Rover (JLR), Aston Martin, Rolls-Royce, Bentley, McLaren and Lotus — build cars here and ship them in large quantities to customers across the Atlantic, leaving them exposed to Trump’s plans.
And for them, the US is their most important market. Take JLR: about £6.5 billion of its £29 billion of total sales came from America in the year to March 2024. That is £1 billion more than sales in China and £1.5 billion more than the UK.
So should Britain’s car industry be worried? “We’re not panicking yet,” said a source at one UK carmaker.
Trump first mooted the idea of a blanket tariff in August last year. “If they charge us, we charge them … I do like the 10 per cent for everybody,” he told Fox News.
“US tariffs are certainly going to be a hit to UK carmakers,” said David Bailey, a professor in business management at Birmingham University. “I think Trump will have to do it; he’s got in on the back of blue-collar votes and protecting US industry, so I think it is difficult for him to back down.”
Andy Palmer, former chief executive of Aston Martin and operating chief of Nissan, is more hopeful — as long as Britain plays its cards right. “Trump says he’s a fan of the UK, but how far does that go?” he asked. “The UK government needs to push for exemptions on the blanket tariffs he proposed on the campaign trail. If there was ever an advantage of Brexit, this might be it, as we can diverge from being caught up in tariffs on EU trade, which are inevitable.“The saving grace for the UK is that the US is by far our largest export market. Trump’s tariffs seem to be aimed at nations that have a trade surplus with the US. Thankfully, the UK is relatively balanced.”
Nevertheless, carmakers in countries such as Germany and France have a lever to pull that is not available to their counterparts in the UK. BMW, for example, has extensive works in South Carolina, while Volkswagen operates the Chattanooga assembly plant in Tennessee. And although Renault does not have a factory of its own in the US, it benefits from an alliance with Nissan, which does have a carmaking footprint stateside.
“The big European producers would look to produce more in the US,” said Bailey. “The British-based luxury or premium brands don’t have that option. JLR has for many years talked about an American plant. It will be interesting to see whether this prompts them to do something on that front.”
John Alty, former interim permanent secretary of the Department for International Trade, raises another potential pitfall, recalling that the last time Trump imposed trade tariffs, in 2019, the president settled with the EU first and the UK second.
The other unknown is whether Trump would levy tariffs on the Chinese-made components that go into British cars. Electric vehicle batteries could be one such example, as most of these are currently produced in China before being shipped to UK production lines.
Trump has vowed to implement more punitive tariffs on China and India, which insulate their domestic economies through protectionist policies. In the run-up to the election, Trump promised tariffs of up to 60 per cent on Chinese imports.
Bailey said that if the US were to go down this route, the UK might also be forced to place tariffs on Chinese imports, in exchange for a more favourable rate with the US. “In which case, we might see UK tariffs on Chinese EVs in the way that the EU has done,” he said. The EU last month imposed tariffs of up to 35 per cent on Chinese EVs.
Until Trump returns to the Oval Office in January, it seems British carmakers will have to hope for the best and plan for the worst. They perhaps would not have welcomed the news on Friday that Robert Lighthizer, the US trade representative when Trump launched his last trade war with China, has been asked to take up the post once again.
Nevertheless, when appearing last week for her debut grilling by the Treasury committee, the chancellor, Rachel Reeves, appeared to rule out retaliatory tariffs if a blanket import tax were imposed by the US.
Meanwhile, Pat McFadden, the Cabinet Office minister, suggested that Trump may not follow through on his threat, observing that the president-elect has said “a lot of fiery things” over the years.
But if Trump tariffs do become a reality, arguably the biggest worry will be that they end up sparking a global trade war. “If other countries impose retaliatory tariffs, that will similarly impact the UK’s other export markets, including Europe and Asia,” said Palmer.
“⁠The UK’s lack of manufacturing does leave us exposed, given we are reliant on importing materials for vehicles. This could dramatically push up the cost of manufacturing in an industry that is already struggling.”