They have been called “the US’s Brexit”, a profoundly destructive economic policy that has been compared to the “microbudget” that cut Liz Truss’s premiership short. It is concerning that people talking about self-destructive economic policies turn so quickly to the UK for a comparison, but there is no denying that the USA’s new raft of trade tariffs is far bigger in terms of scale and destructive potential.
But the UK will still feel the impact of those policies. On the 12th of March this year, US President Donald Trump imposed a 25% on all aluminium, steel and derivative goods imports. To add to that, on the 3rd of April Trump imposed a 25% tariff on all passenger vehicles and light trucks, and a further 25% tariff on automobile parts is due to be implemented no later than the 3rd of May. From the 5th of April, the Trump administration has also imposed a 10% baseline tariff on imports from the UK that will affect most goods, with exemptions for those subject to the steel, aluminium and automobile tariffs already in place.
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The tariffs also have exceptions for copper, pharmaceuticals, semiconductors, timber, energy, energy products and minerals not available in the US. However, even here, Trump has made indications that he may introduce tariffs on semiconductors and pharmaceuticals, as well as copper and timber.
One of the things that makes these tariffs such a threat to a wide range of industries is how unpredictable they are. For instance, tariffs on US imports from the UK were due to be lower than the so-called “reciprocal tariffs” announced on the 2nd of April, such as the 20% tariff on EU goods, or the 24% and 31% tariffs placed on Japan and Switzerland. Then, on the 9th of April, Trump announced that reciprocal tariffs would be paused for 90 days for all countries except China, and that all countries except it, Canada and Mexico would face a 10% “baseline” tariff.
The impact of these tariffs will be huge. On the BBC’s Sunday with Laura Kuenssberg programme, Chief Secretary to the Treasury, Darren Jones said that “Globalisation as we’ve known it for the last couple of decades has come to an end.”
The Stateside situation
For the automotive sector in the United States, the impact will be immediate. S&P Global Ratings has predicted that prolonged tariffs on all auto imports in the country, combined with tariffs on steel and aluminium, will have a multi-billion-dollar impact on the incomes of North American automakers and suppliers. This will lead to vehicle prices potentially 5% to 10% higher for consumers, as well as reduced domestic demand, making negative ratings actions more likely in the coming quarters.
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By GlobalDataUS automotive issuers can expect to see margin declines and cash flow volatility for the next couple of years, triggering credit deterioration, especially for the lower-rated auto suppliers.
Again, the concern is not just the impact of the tariffs themselves, but the unpredictability they introduce. While Donald Trump himself has proved volatile and unpredictable, his actions are inviting equally drastic responses from other governments. China, for instance, has introduced export restrictions on seven rare earth elements, which will have a significant impact on automotive supply chains.
To reflect the impact of the existing tariffs S&P has revised its light vehicle sales estimates will be down by 2% for this year and 7% for next year, compared to the estimates it released in January. The firm now believes that auto sales will remain no higher than 15.5 million units through 2027.
The British perspective
While the impact on the automotive industries in the United States is obvious, it will also be felt in the UK, although what form that will take is yet to be seen.
In its response to the latest SMMT new car registration figures, Group Chief Commercial Officer of car buying platform Carwow, Philipp Sayler von Amende said, “We don’t yet know the impact that President Trump’s new 25% tariffs on vehicles might have on the UK motor retail sector.”
However, while the tariffs will create a volatile trade environment, they could also represent opportunities for the UK.
“Trump’s tariffs could serve as a catalyst for the UK automotive sector to pivot and strengthen trade ties beyond the US by opening up opportunities in fast-growing markets across Asia, the Middle East, and within Europe,” says Daniel Briggs, CEO at specialist car discount provider Motorfinity. “For UK-based manufacturers, it may also encourage deeper investment in domestic production and innovation, making the sector more resilient and self-sufficient. At Motorfinity, we’re already working closely with our trusted manufacturer partners to make sure our customers continue to get great deals and faster access to the latest vehicles.”
Sayler von Amende has also predicted that tariffs could drive a renewed focus on European production, marketing and sales efforts, increasing competition and potentially lowering prices in the region. However, he cautions that the UK must be proactive in seizing those opportunities.
He added, “The Government must ensure that the UK remains a competitive and attractive market for automotive innovation and growth. It is clear that manufacturers need the confidence to invest, car dealers need access to new and used stock, and consumers will continue to expect choice at a range of prices.”
Despite those potential silver linings, there is still no denying that Trump is creating uncertainty for the UK automotive sector, particularly given the UK’s strong export ties with the US.
“While a possible temporary exemption for the global car industry has been floated, it offers only short-term relief and prolongs uncertainty for manufacturers and finance providers,” Sayler von Amende tells us. “The UK exported £8.3 billion worth of vehicles to the US in the 12 months to Q3 2024 – representing 14.2% of total UK goods exports to the US during that period. If the tariffs are implemented, UK manufacturers could face serious disruption across supply chains.”
Naturally, those effects will also have consequences for the financing sector.
“For the motor finance sector, any wider economic instability or increased cost of borrowing tied to tariffs could dampen consumer demand for car finance and new vehicle purchases, putting pressure on both lenders and dealerships,” Sayler von Amende says.
A boon for consumers?
Market instability side, there is an argument that these tariffs could ultimately lead to lower prices for consumers in the long term.
“While shifts in trade dynamics may initially alter vehicle pricing, UK consumers could benefit in the long run from a more diversified and competitive automotive market,” Briggs points out. “As manufacturers adjust to new realities, we may see increased availability of affordable, domestically produced or non-US vehicles, including cutting-edge electric and hybrid models.”
Sayler von Amende also points to potential benefits for consumers, telling us, “If manufacturers shift focus towards European production to avoid US tariffs, it could increase competition in the UK market and potentially lower new car prices.”
These changes in the industry could also yield better options on the financing side of the industry.
“Consumers might also eventually see more flexible and innovative finance products as UK lenders adapt quickly to evolving market demands, prioritising value and convenience for drivers,” Briggs says. “Overall, we look at the changes being made in light of these tariffs as positive for consumers. We are optimistic that this will encourage the UK to become reliant once again on British manufacturing, creating more opportunities within our economy.”
Long term, the consequences of the tariffs might ultimately benefit consumers, if the government and industries respond in the right way, but the consumers themselves may not see it that way in the short term.
“Major economic shocks also tend to make UK consumers more cautious with high-value purchases – including cars – which could slow new car sales and reshape demand patterns,” Sayler von Amende says. “If economic uncertainty persists and borrowing costs rise, UK consumers may face higher interest rates on car finance, leading to more expensive monthly payments. This may push more buyers towards buying used vehicles, potentially rising prices in that segment.”
Mounting a response
Whether the Trump tariffs are an opportunity for the British automotive sector to grasp with both hands, or the source of yet more instability in an industry still recovering from a period of volatility, will depend on the response of the British industry and government alike.
For some, this is a chance to innovate.
“UK manufacturers are using this moment to innovate – reassessing supply chains, boosting local production capabilities, and investing in future-ready technologies like electric vehicles (EV) and autonomous vehicles,” Briggs observes. “This could ultimately enhance the global competitiveness of British brands.”
Others, however, are preparing their defences against the coming storm.
“Jaguar Land Rover has already paused shipments to the US, reflecting the scale of uncertainty,” says Sayler von Amende. “Some European OEMs, such as Mercedes-Benz and Volvo, have accelerated US-based manufacturing to shield themselves from import tariffs, though many still rely on components sourced from outside the US. If the tariffs stay in place, the consequences will ripple across the sector – from factory output, to dealer networks, and customer affordability.”
Risk and opportunity can combine, however. Briggs points out that in the financial sector, this is being used as a way to develop new tools and products.
“Finance companies, meanwhile, are leveraging this period to modernise by developing smarter risk models, expanding into green finance, and offering more personalised lending products,” Briggs says.
The big question is whether the British government is going to respond to the tariffs in a way that will allow the automotive industry to make the best of the opportunities and challenges ahead.
“This is an opportunity for the UK government to double down on its ambition to become a global leader in green mobility and advanced manufacturing,” Briggs argues. “By supporting research and development, incentivising clean vehicle production, and forming strategic trade partnerships, the government can turn current headwinds into long-term gains.”
Sayler von Amende also emphasises the importance of the UK government’s role in ensuring that the UK remains a viable base for manufacturing and innovation, even amid trade disruptions.
“The easing of ZEV mandate targets offers some relief to many manufacturers in the short term, particularly the extension for full and plug-in hybrids to 2035,” says Sayler von Amende. “However, this must be supported by continued investment in EV charging infrastructure and consumer incentives to encourage EV adoption. Exempting small-volume manufacturers from the ZEV mandate is also a positive step, helping to preserve diversity and innovation within the UK’s specialist car market.”
A similar approach will also be required to support the motor finance sector, where innovation is as important as it is in the manufacturing sector.
“Policies that promote financial innovation and support access to affordable credit – especially for green vehicles – can solidify the UK’s reputation as a forward-looking, consumer-friendly finance hub,” Briggs tells us.
Of course, if there is one thing that the finance sector has learned over the course of the last decade, it is the importance of stability.
“Any government action that stabilises the broader economy and supports consumer confidence – including maintaining access to affordable credit – will be key,” Sayler von Amende says.
A global perspective
However the industry and government respond to the tumult created by these tariffs, it is important that the response takes into account not just the UK and US, but the entire international market.
“As global trade flows shift, the UK is well-positioned to become a flexible, strategic alternative for both investment and trade,” Briggs says. “If manufacturers in Europe or China re-evaluate their global strategies, the UK could benefit from increased inward investment, joint ventures, or technology partnerships.”
This means that if the British automotive and car finance industries can adapt quickly enough, it is not just consumers in the UK that they could win over.
Briggs concludes, “As competition intensifies globally, British manufacturers and financiers that innovate quickly could capture new market share – especially in sectors like EVs, where the UK already has strong momentum.”
