One of the quirks of tariff regimes is that EU and UK light vehicle exports to the US face just a 2.5% tariff whereas those coming the other way face a 10% charge on a vehicle’s declared landed value[1]. It seems surprising that this difference has continued for as long as it has, but it probably won’t last much longer. President Trump has been threatening allies and enemies alike with tariffs but – as in Canada and Mexico – he has postponed them following political, or rather quasi-military concessions. It would not been entirely surprising if these threatened tariffs were not actually implemented. While with Trump it is unwise to be too definitive with predictions, in this fast-changing environment steel and aluminium-specific tariffs now appear likely.

Attention now shifts to the EU and the UK. The former has long been in the President’s sights, and the latter potentially is, too, although Trump has hinted he could give the UK better treatment than the EU. The promise of a second state visit and a ride down the Mall in a gilded cage or carriage, may have some economic benefits after all.

Significantly, before President Trump has “decided” on his tariff policy regarding the EU, the EU has suggested that it may well offer concessions to the United States. Reducing the EU’s 10% tariff on light vehicle imports is a prime candidate. Reports suggest that the EU would apply this tariff reduction to all car imports into the EU, including Chinese ICE or hybrid models (the recently introduced supplementary tariffs on Chinese EVs would stay, although they are subject to legal challenge, from European vehicle manufacturers and China).

BMW CEO Oliver Zipse had already suggested doing this anyway, although his reasons reflect self-interest. BMW relies on its highly profitable trade in light vehicles in both directions across the Atlantic. BMW sold around 180,000 German-made cars in the US in 2024 for example, and the EU is the biggest export market for the X4, X5, X6 and X7 models made in Spartanburg in South Carolina, BMW’s biggest factory in the world. Reducing import tariffs in the EU and preventing a rise in US import tariffs is clearly in BMW’s interests. BMW’s exports to the US will have been worth at least $7bn in terms of landed value, and BMW already paying tariffs of c$180m at 2.5%; this compares to around $5bn worth of exports to Europe, generating $500m in tariffs for the EU and UK.

Mercedes and Volvo also ship vehicles both ways between the US and Europe and have very similar interests to BMW, except their numbers are lower. Other vehicle companies are less impacted or are impacted in only one direction, if at all. Most of what Volkswagen sells in the US is either made in the US or Mexico, with only the Golf imported from Germany, although that will, ironically, switch to Mexican production in 2026. Audi sold 130,000 EU-made vehicles in the US, while Porsche sold around 76,000 vehicles. Both brands will have to look at US production to get around any tariff increases. Porsche is reportedly especially worried about its customers moving away from the brand if tariffs rise, possibly quadrupling or worse.

President Trump may sense a weakness in the EU if it offers a tariff reduction before he demands one, or before he has had the chance to announce a tariff rise. Whatever the outcome for US-EU relations, the situation is concerning for the UK, especially Jaguar Land Rover, and to a lesser extent MINI (owned by BMW). The luxury brands, Bentley, Rolls Royce and Aston Martin for example, will certainly not want tariffs to rise but their customers can arguably afford a tariff increase more than car buyers lower down the price range.

JLR sold 120,000 UK or EU made vehicle in the US in 2024, equivalent to around $6bn in landed value and $165m in tariffs. However, the US represents just over 30% of JLR’s UK production in 2024, so anything which impacts this could seriously impact JLR’s finances. For MINI, the US accounted for a lower proportion of around 14% of declining UK production last year. Despite the exclusive nature of some JLR products, it seems unlikely that all its customers will be able to justify their purchases if tariffs quadruple. For MINI, given its lower price position and more competitive market segment, the risk is arguably higher still.

The UK may secure a carve-out from the automobile tariffs which President Trump decides to levy on Europe. The UK may be lucky, but even if it is, it will surely have to match whatever the EU does with regard to tariffs on US imports. Reduced tariffs on US-made vehicles may well be the price which the EU (and the UK) has to pay. It is worth noting that most Jeeps sold in Europe (Jeep is the only US brand of any significance in Europe) are actually made in Italy and Poland. Moreover, European consumers generally do not buy US-made Fords or vehicles from General Motors; these are too big for most European consumers’ likes and will fall foul of ever tightening EU and UK emissions rules. That said, European brands’ US-made vehicles do sell well in Europe and the UK.

If tariffs on US-made vehicles imported into Europe fall, then UK car buyers may also benefit, as the UK government will surely have to follow EU policy to appease President Trump. UK car buyers could well benefit from reduced tariffs from BMW X models made in Spartanburg, as well as large Mercedes SUVs from Alabama and even some large SUVs from Volvo’s US plant too. Although these may not be the cheaper shoes and clothes Jacob Rees-Mogg promised Brexit supporters, there is the possibility of a discount on their next BMW, Mercedes or Volvo SUV. Ironically, this price reduction would be down to the political need to match whatever the EU does, rather than due to any UK-specific power of sovereignty. The law of unintended consequences can work in strange ways.

Footnotes

[1]  The reported trade data from Comtrade differ somewhat depending on whether one takes the numbers reported by the UK or the US. The US reported numbers suggest that UK exports to the US were $6.5B and imports were $721M; while the UK reported numbers suggest that UK exports were $855m and imports were just under $1.1B.

Note: all value calculations above by Ian Henry of AutoAnalysis; production and sales data quoted above are from industry sources, including SMMT and Automotive News (autonews.com).

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