Trump considers pausing car tariffs: what it means for UK buyers

“I’m looking at something to help some of the car companies with it,” Trump told reporters gathered in the Oval Office. The Republican president said carmakers needed time to relocate production from Canada, Mexico and other places, “And they need a little bit of time because they’re going to make them here, but they need a little bit of time. So I’m talking about things like that.”

Trump’s statement suggests yet another potential reversal on tariffs, following a series of policy shifts that have rattled financial markets and sparked growing concerns among Wall Street economists about the risk of a recession.

When Trump introduced the 25% auto tariffs on 27 March, he called them ‘permanent.’ However, his previously firm stance on trade has softened as he navigates the economic and political fallout from his policies.

Last week, following a bond market sell-off that pushed US debt interest rates higher, Trump announced that for 90 days his broader tariffs against dozens of countries would instead be set at a baseline 10% to give time for negotiations.

At the same time, Trump raised import taxes on China to a staggering 145%, but made a temporary exception for electronics, reducing the tariff to 20% on those goods.

Trump has long argued that the US is being exploited by other countries and that tariffs are the solution. However, his repeated delays and revisions to tariff proposals have fuelled market instability, triggering sharp sell-offs and raising concerns among businesses and consumers.

What are tariffs?

A tariff is a tax on imports imposed by the government and typically paid by the company importing the goods – in this context, cars. Tariffs are usually calculated as a percentage of the value of the imported goods. For example, a 25% tariff on a £20,000 imported car would add £5,000 to its cost.

While tariffs are meant to protect domestic businesses, consumers may end up paying more for cars if importers pass on the higher costs instead of absorbing them or reducing imports.

US carmakers – including General Motors and Ford – have previously urged the president to exempt imported cars and vehicle parts from tariffs.

So, what does this mean for drivers in the UK?

Now that Trump is contemplating freezing these auto tariffs, there are many things that could happen. If the tariffs are paused, the added 25% tax on imported vehicles would be temporarily lifted. This could reduce the overall price of foreign-made cars, especially if you plan to buy cars from countries like Japan, Germany, or South Korea.

With fewer tariffs, carmakers may also be willing to import a wider range of cars, increasing availability and variety of cars in the market. This could help if you’re looking for a specific model that was previously made more expensive due to the tariff.

While lifting these tariffs may benefit consumers, it also introduces uncertainty about the long-term impact, especially given that Trump’s previous tariff revisions have already caused global market instability. This could make both carmakers and consumers hesitant, as they remain unsure whether the tariffs will be reinstated after the pause.

What if Trump permanently goes ahead with the tariffs?

With tariffs in effect, you could face price hikes on popular models from German brands such as BMW, Audi, and Mercedes-Benz, which rely heavily on sales in the US market.

According to Mike Thompson, COO at Leasing Options, these manufacturers may increase UK prices to offset losses from US tariffs as a result. This could make premium vehicles less affordable for British car buyers.

Reshuffling global supply chains in response to tariffs may also affect availability. Manufacturers might prioritise markets with fewer trade barriers, meaning you could face shortages of certain models. For example, EVs such as BMW’s i4 and iX could be redirected to regions with stronger demand or lower tariff concerns.

This poses a challenge for UK drivers, especially with the 2035 zero-emissions target and the upcoming ban on new petrol and diesel cars. Trump’s tariffs could also disrupt global production and supply chains, potentially making it harder for the UK to secure the electric cars needed to meet its Zero Emission Vehicle (ZEV) mandate and transition goals.

Tariffs could also lead to shifts in buying behaviour, with an ‘economic wobble’ caused by global trade tensions potentially putting pressure on household finances. When that happens, people typically tighten their belts, which could drive used car prices lower as demand softens.

The industry’s response

Economists have raised red flags about Trump’s approach, warning that tariffs could drive up prices across the US. A study by automotive consultancy Anderson Economic Group recently found that blanket tariffs on Canada and Mexico could increase car prices by up to $12,000.

With major car exporters – including Mexico, Japan, South Korea, Canada, and Germany – potentially affected, the economic consequences could be far-reaching. However, White House official Will Scharf has argued that the tariffs could generate over $100bn in annual revenue for the US.

European commission president Ursula von der Leyen said the EU would study the latest announcement alongside other tariffs Trump has announced.

“As I have said before, tariffs are taxes – bad for businesses, worse for consumers equally in the US and the EU,” she said. “The EU will continue to seek negotiated solutions while safeguarding its economic interests.”

However, INEOS Automotive argued that the EU has neglected the tariff situation with the US, despite Trump’s clear intentions to implement tariffs, and that European leaders have failed to come to the table to negotiate a better solution.

“This is what happens when politicians sit on their hands,” said Lynn Calder, CEO of INEOS Automotive. “As a growing EU-based automobile brand, we are vulnerable to tariffs, and we need our politicians to support our business, our jobs and our economies. We need urgent and direct political intervention on tariffs.”

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), expressed disappointment over the tariffs. He warned that additional tariffs on UK-made cars could harm the long-standing UK-US trade relationship, as US consumers enjoy British-built vehicles and UK drivers buy American-made cars.

Hawes urged British and American manufacturers to explore mutually beneficial opportunities that boost growth and jobs. He also called for both sides to negotiate a deal that works for all.

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