Donald Trump has announced 25 per cent tariffs on all motor vehicle imports to the United States, in a move that will inflict another blow on the UK economy.
During a press conference in the Oval Office, the US president announced that cars and light trucks imported into the US would be subject to the levy in the latest escalation of the Trump administration’s far-reaching trade war.
“What we’re going to be doing is a 25% tariff for all cars that are not made in the United States,” Trump said.
The announcement raises fears of greater economic pain in the UK, whose largest vehicle export market is the US, having sold £6.4bn in motor vehicles to the country in 2023, according to the Office of National Statistics.
It comes after the Office of Budget Responsibility halved the UK’s economic growth forecast from 2 per cent during a day in which chancellor Rachel Reeves announced sweeping cuts to benefits to rein in the budget and boost defence spending.
Andrew Griffith, the shadow trade secretary, called the announcement “concerning”, adding that British jobs are “clearly now at real risk”.
He told The Telegraph: “I’m afraid Labour have dropped the ball here. This Government has never laid out a plan, took too long to get round the table with Trump and, as of now, they have nothing to show for it.”
The OBR earlier warned tariffs threatened by Trump could could eliminate all of Ms Reeves’ margin of error in her budget if they are implemented.
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”.
But Mr Reynolds was unable to secure an exemption for the UK from steel tariffs imposed by Mr Trump earlier in March.
Sir Keir Starmer has also been speaking directly to the US president about progress on an economic deal between the UK and US.
Media reports have suggested Britain could slash the digital services tax – a levy on big tech companies – in order to stave off American tariffs, though Ms Reeves also appeared to rule this out on Wednesday.
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 £9.9 billion headroom against her fiscal rules, potentially forcing her to implement further spending cuts or tax rises.
Following the announcement the European Commission said it will assess the tariffs, with Ursula von der Leyen calling them “bad for businesses, worse for consumers equally in the U.S. and the European Union”.
Machinery and transport equipment made up almost half of the UK’s goods exports to the US in 2023.
This included £6.4 billion of car exports, which accounted for 18.4 per cent of all UK car exports, making the US the UK’s largest export partner for cars.
The carve out for imports of auto parts is meant to be a lifeline for the US auto industry.
“What we’re gonna be doing is a 25 percent tariffs on all cars that are not made in the United States,” Trump said as he announced the measures in the Oval Office. “This will continue to spur growth.
“I think our automobile business will flourish like it’s never flourished before.”
In the coming days, the US is expected to introduce further measures targeting imports of computer chips, pharmaceutical drugs, copper and lumber, plans which the president reiterated at his event Wednesday afternoon.
Mike Hawes, Society for Motor Manufacturers and Traders (SMMT) chief executive, said that the announcement was ‘not surprising, but nevertheless disappointing’.
He added: “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.
“Rather than imposing additional tariffs, we should explore ways in which opportunities for both British and American manufacturers can be created as part of a mutually beneficial relationship, benefitting consumers and creating jobs and growth across the Atlantic. The industry urges both sides to come together immediately and strike a deal that works for all.”