Car makers in the UK and Europe are bracing for what for many will be the biggest financial shock since Covid when the newly announced 25% tariff on cars imported into the US are applied on 2 April.
The tariffs apply to all cars and light commercials imported into the US that aren't covered by the Mexico-US-Canada automotive tariff agreement, significantly raising the cost of doing business in the US.
Firms including Aston Martin, Audi, Bentley, BMW and JLR were relying on healthy sales in the US to balance out crashing demand in China and a weaker European market.
“It's a perfect storm for the European auto industry,” said David Bailey, professor of business economics at the Birmingham Business School. “UK auto already has a low-volume crisis, with plants operating well below capacity.”
The US is UK’s second largest car export market after the EU, with 101,100 cars shipped in 2024, according to data from the Society of Motor Manufacturers and Traders. The lobbying body called the tariff hike "disappointing".
JLR was by far the largest British automotive exporter to the US, with sales up by 29% to 116,294 cars last year, of which around two thirds were built in the UK.
Ultra-luxury brands including Aston Martin, Bentley, McLaren and Rolls-Royce accounted for around 9000 car imports there last year.
JLR chose not to comment on the tariffs except to say it was awaiting further information. The share value of JLR owner Tata Motors dropped 5.6% after the news.
Ineos Automotive stated: "We are outraged that the tariff situation with the US has been neglected by the EU.
"[US] president [Donald] Trump has been very clear on his intention to implement tariffs on the auto industry. He has been asking for fairness and reciprocity and yet European leaders have not come to the table to negotiate a better solution."
The 25% tariff comes on top of the 2.5% duty already paid by car makers importing into the US and is paid on the ‘landing’ price of the car, minus the dealer margin. The tariff will in effect add 15% to the recommended retail price of the car, estimated the bank Bernstein in a note to investors.
Car makers will have to choose whether to pass on the cost to customers or absorb it and take the hit on margins. Given the size of the tariff compared with the 10% that most analysts had been expecting earlier in the year, most will have no choice but to increase prices.
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