Trade Agreement between U.K. and U.S. Alleviates Concerns in Export-Oriented British High-End Automobile Industry

Trade Agreement between U.K. and U.S. Alleviates Concerns in Export-Oriented British High-End Automobile Industry

The U.S. and U.K. have embarked on a new chapter of their trade relations with the announcement of the Economic Prosperity Deal (EPD) in May 2025. One of the key aspects of this deal is the commitment to reduce tariffs on U.K.-made car imports into the U.S.

For the U.K., the U.S. is its second-largest car export market after the European Union, with over 101,000 units shipped in 2024, representing 16.9% of cars exported. The value of U.K. passenger car exports to the U.S. was £7.6 billion ($10.1 billion) in 2024, primarily consisting of premium and luxury cars.

However, American manufacturers are less enthused about the deal, as they have weaker links with the U.K. compared to Canada or Mexico. U.S. passenger-car imports to the U.K. only reached 18,000 units in 2024, out of 1.953 million new U.K. car registrations that year.

The EPD sets a tariff of 10% on U.K. car exports to the U.S., applicable to a quota of 100,000 cars per year. Any exports above this quota will be subject to a 25% tariff. The deal also includes an accompanying arrangement for auto parts.

The tariff reduction is a welcome development for U.K. automotive exporters, according to Mike Hawes, chief executive of the U.K. Society of Motor Manufacturers and Traders (SMMT). However, William Bain, head of trade policy at British Chambers of Commerce, notes that U.K. automotive exporters are still in a worse position than before new U.S. tariffs came into effect on April 2.

The U.S. government's implementation of a declaration to help U.S. auto producers source parts overseas with tariff rebates is expected in the next month, but it may not cover all car part imports from the U.K. under all possible international commercial terms.

The European Commission is closely analyzing the U.S.-U.K. trade deal and is committed to a more conventional trade deal with fair, rules-based trade, including in the context of the WTO. The Commission wants an EU/U.S. trade deal to remove barriers on both sides and deliver real benefits for industries on both sides of the Atlantic.

The timeline for finalizing the binding legal text and implementing specific tariff changes, such as those on U.K. car imports, is uncertain. The process could take several months to years, depending on the complexity of the negotiations and the political will of the parties involved.

The U.S. auto industry, represented by the American Automotive Policy Council, has expressed disappointment that the administration prioritized the U.K. over North American partners. Matt Blunt, President of the American Automotive Policy Council, has voiced his concerns, stating that the deal could lead to increased competition in certain segments due to the trade deal.

In conclusion, the U.S./U.K. Economic Prosperity Deal represents a significant step forward in the relationship between the two nations, particularly in the auto industry. While the deal is a positive development for U.K. automotive exporters, it also poses challenges for American manufacturers, especially given the U.S.'s traditionally strong ties with Canada and Mexico. The negotiation process is ongoing, and the final details, including the implementation timeline, are yet to be determined.

1. The automotive industry is one of the sectors greatly impacted by the U.S. and U.K.'s Economic Prosperity Deal (EPD).
2. The U.S. is the second-largest market for U.K.-made cars, receiving over 101,000 units in 2024.
3. In 2024, the value of U.K. passenger car exports to the U.S. was £7.6 billion ($10.1 billion).
4. U.S. passenger-car imports to the U.K., however, were only 18,000 units in 2024.
5. The EPD sets a 10% tariff on U.K. car exports to the U.S., but any exports above 100,000 units per year will be subject to a 25% tariff.
6. The deal also includes arrangements for auto parts.
7. Mike Hawes, chief executive of the U.K. Society of Motor Manufacturers and Traders (SMMT), views the tariff reduction as a positive development.
8. William Bain, head of trade policy at British Chambers of Commerce, notes that U.K. automotive exporters are still in a worse position compared to before new U.S. tariffs came into effect in April 2025.
9. The U.S. government is expected to implement a declaration to help U.S. auto producers source parts overseas with tariff rebates in the next month.
10. The European Commission is analyzing the U.S.-U.K. trade deal and is committed to a more conventional trade deal with the EU.
11. The Commission aims to remove barriers on both sides and deliver benefits for industries on both sides of the Atlantic.
12. The negotiation process for finalizing the binding legal text and implementing specific tariff changes is ongoing.
13. The American Automotive Policy Council has expressed disappointment that the administration prioritized the U.K. over North American partners.
14. Matt Blunt, President of the American Automotive Policy Council, has voiced concerns that the deal could lead to increased competition in certain segments.
15. The changes in the automotive industry could extend to other sectors like finance, energy, and retail.
16. The housing market, personal finance, food and drink, and fashion-and-beauty industries might also experience fluctuations due to tariff changes.
17. The aerospace, technology, and gadgets industries, particularly smartphones, may be influenced by the deal, as they are closely tied to the automotive industry.
18. The travel sector could also be affected, as people might choose to drive instead of fly due to the changes in car maintenance costs and the appeal of electric vehicles.

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