News that the UK and US have finalised a deal to reduce trade tariffs has been welcomed across the automotive sector.

Car export tariffs have been slashed from 27.5% to 10%

The agreement follows weeks of negotiations and will see US tariffs on cars immediately slashed from 27.5% to 10%, for up to 100,000 vehicles – almost the total number that the UK exported last year.

Levies on steel and aluminium will be reduced from 25% to zero, but the general 10% tariff for other UK products introduced in last month’s ‘Liberation Day’ will remain.

Prime Minister Keir Starmer said: “The new global era demands a government that steps up, not stands aside.

“This historic deal delivers for British business and British workers protecting thousands of British jobs in key sectors including car manufacturing and steel.

The deal will save hundreds of millions a year for Jaguar Land Rover alone.

Adrian Mardell, chief executive officer at JLR, said: “The car industry is vital to the UK’s economic prosperity, sustaining 250,000 jobs. We warmly welcome this deal which secures greater certainty for our sector and the communities it supports. We would like to thank the UK and US governments for agreeing this deal at pace and look forward to continued engagement over the coming months.”

The UK’s Society of Motor Manufacturers and Traders (SMMT) said the announcement was great news for the industry and consumers.

Mike Hawes, SMMT chief executive, said: “The application of these tariffs was a severe and immediate threat to UK automotive exporters so this deal will provide much needed relief, allowing both the industry, and those that work in it, to approach the future more positively.

“Government has recognised the importance of the automotive industry to UK exports and the wider economy and has worked quickly and tirelessly with US counterparts to strike an agreement. We hope that it will lead to broader and deeper cooperation that reduces barriers to trade still further, charting a path to economic growth for both nations.”

Industry reaction

Philipp Sayler von Amende, chief commercial officer at Carwow

“Attention now shifts to Europe, where French, German, and Italian manufacturers remain fully exposed to the 25% levy. Brussels will be under increasing pressure to secure a similar deal to keep EU exports competitive in the US.

“For UK car dealers and consumers, broader economic uncertainty is still the greater roadblock. April’s SMMT data showed new car registrations down more than 10% – the sixth drop in seven months – as rising costs, tax changes, and shaky consumer confidence continue to dampen demand. But with this new trade deal in place and the prospect of Bank of England rate cuts ahead, there’s growing hope that confidence can rebuild – and that a demand rebound may not be far off.”

Steffen Hoffmann, managing director of Bosch UK & Ireland

“The announcement of a reduction in the US tariffs on cars from the UK is welcome news for the UK automotive sector, and is very pleasing for us to see as a vital technology partner for many of the vehicles built in Britain. Beyond supplying components, we are increasingly providing advanced automotive services that are integrated into new vehicles, which may of course be less visible, but nonetheless contribute to their ultimate value.”

Cara Haffey, leader of industry for industrials and services at PwC UK

“For UK carmakers and OEMs, this news, alongside the Bank of England reducing interest rates to 4.25%, offers some increased stability and will facilitate more accurate long-term forecasting and planning.

“While it is still relatively early to measure the impacts over time, these are likely to vary by market segment. Compounding these challenges is the fact that vehicles are discretionary, high-value purchases, and most of the UK-made cars exported to the US are premium and high-end brands. However, softer economic conditions supported by lower interest rates could potentially spur consumer demand.”

Dom Tribe, PwC UK automotive sector leader, added: “In contrast, mass-market vehicle makers, for whom pricing is a more sensitive lever, could see sharper declines in competitiveness and volumes in the US market, especially if tariffs are decidedly passed on to drivers – which could lead consumers to keep their cars longer or buy second-hand, impacting customer loyalty and profitability for OEMs.

“There is still an inflection point on a case-by-case basis as to how much automotive companies can or will be willing to flow price increases through to consumers. If tariff rates are deemed low enough, it may mean that OEMs will not look to make drastic changes to their manufacturing footprint and supply chain networks but look at other cost avoidance or reduction measures which might be able to offset some, or all, of the price uplift.”

Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA)

“This is a positive step that brings much-needed reassurance to businesses involved in transatlantic trade, including many of our dealer members and their manufacturing partners.

“This deal represents a significant opportunity for the UK automotive sector. Lower tariffs will help enhance the competitiveness of UK-built vehicles in the US market, support long-term investment, and streamline the flow of goods across borders. We are optimistic about the benefits this will bring to dealers, manufacturers and consumers alike.

“The agreement comes at a pivotal moment for the industry, which continues to face pressures from inflation, evolving regulations, and the shift to zero-emission vehicles. Greater certainty and a stable trade environment will be essential in helping the sector plan for the future.

“We will continue to engage with Government and our members to ensure the UK’s franchised vehicle retail sector is well-positioned to benefit from this deal and future international trade agreements.”