US automotive tariffs: How will they impact the UK?
Dr Angela Garcia Calvo, Lecturer in International Business and Strategy discusses the US automotive tariffs and how they will affect the UK.

In a move that is bound to shake the global automotive industry, the US is set to impose tariffs of 25% on imports of foreign-made vehicles from 2nd April, and on certain parts and components from no later than 3rdMay. The rationale for the introduction of tariffs is to address what the White House considers as “a critical threat to U.S. national security”.
Few manufacturers will be spared, including those in the US. But what does this mean for the UK? And how should we interpret the UK’s decision not to retaliate?
There are three factors to consider. The first is the importance of the US market for UK vehicles exports. Close to 80% of UK vehicle production is exported, but only 13% of this goes to the US. Most of these are exports of premium vehicles from Rolls Royce, Aston Martin, and Bentley, whose clients are less price sensitive. These brands may be expected to pass the tariff on to consumers, therefore limiting the direct impact.
The second is the indirect effect of the tariffs via their impact on manufacturers who do not export vehicles produced in the UK to the US but are heavily exposed to US tariffs through their production sites in North America. This is the case for Nissan and Toyota, which account for almost half of the UK’s automotive production. Toyota, which has a large production presence in the US but imports parts and components from Japan can expect to be heavily hit by the tariffs. So too Nissan, which produces in Mexico and exports to the US.
At a time when the transition to EVs is already hurting both producers and the sales of vehicles in Europe - the main market for their UK production already affected by post-Brexit tariffs - US tariffs may be the coup de grace that makes these automakers reconsider their commitment to the UK market.
If these automakers pulled out of the UK, it would have devastating consequences for the UK automotive industry.
The third factor is the relative importance of the automotive sector for the UK economy and for the relationship between the UK and the US. Although the automotive sector is an important component of UK manufacturing, it only represents about 0.6% of the UK’s total output. Other industries such as biotech, and digital make heftier contributions to the UK GDP, create high quality employment, and are critical industries for future sustainable growth.
More importantly, these sectors depend on US investment and technological partnerships to thrive. This sets the current and concrete tariff threat to the automotive sector in the broader context of UK-US relationships. It also sets a mature sector that has been declining in the UK for the past decade against rapidly growing industries that are critical to future growth.
From this perspective, the sensible approach is a cautious response to automotive tariffs that does not antagonise the US, together with a constructive approach that aims to ensure a continued UK-US partnership and reliable access to critical technologies.
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