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British automotive manufacturers are set to convene with government ministers on Friday to strategize their response to the impending implementation of 25% tariffs on car imports, as announced by US President Donald Trump. These tariffs are scheduled to take effect at midnight on April 3.
The UK government is actively seeking exemptions from a broad spectrum of US import taxes, emphasizing the urgency of the situation. However, several industry stakeholders have expressed the view that it may be too late to avert the new measures and are instead advocating for discussions regarding potential support packages.
The British government has asserted that it will avoid escalating the situation into a full-fledged trade war with the United States, contrasting sharply with countries like Germany, which has publicly vowed to resist these tariffs and demanded a robust European response.
Government insiders maintain that negotiations regarding the tariffs remain dynamic, with prospects for a successful resolution still viable. Trump’s administration has justified the tariffs under the pretext of national security concerns.
The automotive sector represents the largest export from the UK to the US, with sales reaching 101,000 vehicles valued at £9 billion last year. Consequently, the industry is likely to seek assistance from the UK government to mitigate the anticipated disruptions stemming from these tariffs.
Moreover, there are discussions underway about modifying the regulations surrounding zero-emission vehicles, which may inadvertently disadvantage UK manufacturers while benefiting foreign companies, such as Tesla, linked to Trump ally Elon Musk.
Other nations, including France and Canada, have signaled intentions to retaliate against US trade actions. Canada’s Prime Minister Mark Carney, previously the Governor of the Bank of England, declared that his country would vigorously oppose the tariffs, indicating a significant strain in the long-standing Canada-US relationship.
Secrecy Surrounding Negotiations
Details of the UK’s negotiations with the US remain closely guarded, with only a limited number of officials privy to discussions that potentially address a broader range of tariffs beyond just the automotive sector. Despite some diplomatic progress, sources indicate that the final outcomes will largely hinge on Trump’s decisions.
Earlier this week, Trump reiterated his commitment to implementing the tariffs without exemptions for car imports. Nevertheless, negotiations are ongoing worldwide regarding the future landscape of “reciprocal tariffs” that could emerge next week.
The potential ramifications of these tariffs on the UK economy are significant, threatening to erase Chancellor Rachel Reeves’s £9.9 billion buffer against her borrowing and debt benchmarks. In a recent report analyzing the impact of tariffs, the Office for Budget Responsibility (OBR) outlined various economic scenarios.
In the most severe scenario outlined by OBR, if global trade conflicts escalate to involve tariff increases of 20 percentage points between the US and other nations, the UK could see a downturn in economic growth of up to 1%. This scenario could nearly eliminate the fiscal headroom the government is projected to have by the 2029-30 period, reducing it to almost negligible levels.
Source
www.bbc.com