Chancellor Rachel Reeves stated that the UK government has no immediate plans for retaliatory tariffs against the United States.
This comes in response to President Donald Trump’s decision to impose a 25% tariff on all car imports, a move that sent shockwaves through global markets.
“We are not at the moment in a position where we want to do anything to escalate these trade wars,” Reeves said when asked whether Britain would respond with tariffs of its own. “Trade wars are no good for anyone.”
Trump’s announcement, made from the Oval Office, outlined that the new tariffs would rise from “a 2.5% base … to 25%.” The new levies on cars and light trucks are set to take effect on April 3, a day after he unveils reciprocal tariffs aimed at the countries responsible for the bulk of the US trade deficit.
The market reaction was swift. Shares in US carmakers plummeted in after-hours trading, with General Motors sliding 6.2% and Ford falling by 4.7%. The fallout extended globally, with European carmakers and their suppliers suffering steep losses.
Cars are the UK’s largest goods export to the US, with sales worth £6.4 billion in 2023. Major manufacturers, including Aston Martin, Jaguar, and Land Rover, could face significant losses under the new tariffs.
Aston Martin, among the worst hit, saw its stock dive 6%, reaching a record low of 67p, while the FTSE 100 index dropped over 50 points.
The UK’s Society of Motor Manufacturers and Traders (SMMT) has urged the government to provide immediate support for the struggling sector. SMMT chief executive Mike Hawes warned, “These are worrying times for UK vehicle makers with car production falling for 12 months in a row, rising trade tensions, and weak demand.”
Hawes called on both the UK and US governments to “come together immediately and strike a deal that works for all.”
Carmakers Take A Hit
Volkswagen, the German manufacturer most exposed to the tariffs due to its large supply base in Mexico, saw shares drop 3.6%. The DAX index, a key German stock market benchmark, fell 1.6%. Chrysler’s parent company, Stellantis, slumped by 6.4%, while Mercedes-Benz, BMW, and Porsche recorded drops of 5.5%, 3.9%, and 4.2%, respectively.
Asian automakers did not escape the turmoil. In Japan, Toyota’s stock fell 2%, while Honda and Nissan declined by 2.5% and 1.7%, respectively, contributing to a 0.6% dip in the Nikkei index. In South Korea, Hyundai Motor’s shares plummeted by 4.3%, despite its recent $21 billion investment announcement aimed at placating Trump.
Amid mounting criticism, Reeves stated that the government is reviewing an electric vehicle incentive scheme, which has benefitted Tesla. The program allows companies selling only electric vehicles to accumulate credits that can be sold to firms struggling to meet government-mandated EV targets. Canada recently froze similar rebate payments to Tesla.
Reeves acknowledged that the UK’s zero-emission vehicle mandate is under scrutiny.
“We are looking at the zero-emission vehicle mandate … and looking at how we can better support the car manufacturing industry in the UK.”
Rachel Reeves
When asked if Britain could shield domestic carmakers such as Jaguar Land Rover, Rolls-Royce, and Aston Martin from the tariffs, Reeves responded, “That’s what we’re working on.”
Trump’s announcement has been met with strong criticism from world leaders. European Commission President Ursula von der Leyen slammed the move as “bad for businesses, worse for consumers.”
Canada’s Prime Minister Mark Carney was equally blunt, calling the tariffs a “direct attack” on Canadian workers. Germany’s Economy Minister Robert Habeck called for a firm response from the EU, stating, “It needs to be clear that we will not take this lying down.”
As global markets brace for further disruptions, the pressure is mounting on Reeves and the UK government to take decisive action. With only days left before the tariffs take effect, the next steps Britain takes could have lasting consequences for its economy and trading relationships.
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