Interest rate and US tariff cuts cause dealers and OEMs to celebrate

US president Donald Trump has announced a major reduction in tariffs on UK car exports, restoring some confidence to British manufacturers.

The deal comes at the same time as the Bank of England cut interest rates to 4.25% offering businesses the prospect of increased stability that could support more accurate long-term forecasting and planning.

That is positive step for the UK's motor retail industry, which has faced higher operating costs and less attractive finance offers for consumers, which has left both the UK's new and used car markets subdued compared to pre-pandemic trading.

Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said: “This decision will help to ease some of the pressure on both consumers and dealerships amid ongoing economic uncertainty.”

For the UK's car exporters, the tariff on UK car imports into the US has been cut from 27.5% to 10%, although the lower rate will only apply to the first 100,000 vehicles exported to the USA annually.

It's an important agreement for UK car manufacturing, however to put it into context of the 603,565 UK cars manufactured and exported in 2024 only one in six went to the USA.The European Union is a far bigger market for our domestic car plants, which also produce more than 150,000 cars for the UK's own new car buyers.

The deal means the majority of cars exported to the USA by the likes of Bentley, Land Rover, McLaren, Mini, Rolls-Royce and Lotus will benefit from the reduced rate. In return, the UK Government will lift its tariffs on certain items.

The trade battle was not expected to directly impact the UK's motor retailers, however it might have led to some job cuts at UK car plants if production levels reduced or the manufacturers could direct higher levels of production to the UK and EU markets.

The US and UK agreement comes just a month after the US tariffs came into force in April, prompting concern among UK carmakers and officials. That initial decision had been described as “deeply disappointing” by the UK automotive industry.

Speaking during a rapidly arranged visit to the Jaguar Land Rover plant in the West Midlands, Prime Minister Keir Starmer said the agreement represented a vital win for British industry and a "huge and important reduction".

JLR had recently put a pause on its exports to the USA in response to Trump's tariffs.

Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), welcomed the move as a lifeline for the sector, adding: "The application of these tariffs was a severe and immediate threat to UK automotive exporters so this deal will provide much needed relief, allowing both the industry, and those that work in it, to approach the future more positively.

“Government has recognised the importance of the automotive industry to UK exports and the wider economy and has worked quickly and tirelessly with US counterparts to strike an agreement."

Other organisations also welcomed the news. Sue Robinson, chief executive of the National Franchised Dealers Association (NFDA), said the deal will help to support long-term investment by OEMs.

"We are optimistic about the benefits this will bring to dealers, manufacturers, and consumers alike," she said.

Dom Tribe, PwC UK’s automotive sector leader, said that carmakers are likely to assess their response carefully: “There is still an inflection point on a case-by-case basis as to how much automotive companies can or will be willing to flow price increases through to consumers. If tariff rates are deemed low enough, it may mean that OEMs will not look to make drastic changes to their manufacturing footprint and supply chain networks but look at other cost avoidance or reduction measures which might be able to offset some, or all, of the price uplift."