UK and US strike deal to slash auto tariffs

The UK and US have signed an agreement to reduce tariffs on British-made cars, marking a significant shift in trade relations following months of negotiations and mounting pressure from car manufacturers.

Announced by President Donald Trump and UK Prime Minister Sir Keir Starmer during the G7 summit in Canada, the deal will partially implement terms from a pact originally agreed last month.

It allows for up to 100,000 British vehicles to be exported to the US annually under a reduced 10% tariff, down from a 25% rate Trump imposed earlier this year on foreign-made vehicles.

Car exports from the UK were already subject to a 2.5% duty. The imposition of the 25% tariff had threatened to raise that to 27.5%, dealing a severe blow to UK manufacturers.

The new 10% rate, though still a levy, has been described as a "huge reassurance" by Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders.

"This gives British manufacturers something of a competitive edge," Hawes told the BBC. “Many of our key rivals, like Italy and Germany, remain subject to the full 27.5% tariff.”

The announcement is the first trade agreement of its kind from the Trump White House since sweeping tariffs were introduced on a range of global imports earlier this year.

However, the deal stops short of removing US duties on UK steel and includes a 10% tariff on most UK goods, disappointing some industry leaders.

For Jaguar Land Rover, Britain’s largest car manufacturer, the deal comes as a partial lifeline. The Tata-owned company was forced to pause US-bound shipments of vehicles in April due to the 25% duty and has since cut its annual profit guidance. It now expects margins between 5% and 7%, down from 8.5% last year and 10.7% in the first quarter of 2025.

Although JLR produces its flagship Range Rover models in the UK, its popular Defender SUV is built in Slovakia and remains subject to the full US tariff.

Prime Minister Starmer welcomed the agreement, calling it a "very important day" for both countries and a step toward stabilising transatlantic trade amid turbulent economic conditions.

The tariff reduction will come into force seven days after the deal’s official publication.