Navigating the Tariff Tides: How UK Car Sales to the US are Reviving

In July, the number of British-made cars sold to the US surged by 6.8%, marking a notable recovery after three consecutive months of declining sales. This rebound followed the implementation of a UK-US tariff deal, which significantly altered the landscape for car exports. Initially, US President Donald Trump had proposed a hefty 25% import tax on UK vehicles in April, a move that alarmed the industry. However, this threat was mitigated with the adjustment of the tariff down to 10%, effective at the end of June.

Data from the Society of Motor Manufacturers and Traders (SMMT) highlights that the tariff cut was instrumental in facilitating July’s improved sales figures. Despite this surge, the SMMT noted that UK car manufacturing still faces significant challenges, describing the current climate as one of struggle. The US remains a vital market for British vehicles, being the largest single national market for UK car exports, which underscores the gravity of the recent trade deal.

The tariff reduction, applicable up to 100,000 cars, signifies the volume of exports the UK managed to send to the US last year. Beyond this limit, cars will revert to the 25% tax. In July, US sales constituted 18.1% of all UK car exports, whereas the European Union accounted for a more substantial 45.6%.

Colleen McHugh, chief investment officer at Wealthify, pointed out that the US is particularly crucial for premium brands, especially Jaguar Land Rover (JLR), which had paused its shipments due to the initially proposed tariffs before resuming them in May.

Overall, UK car manufacturing experienced a slight upturn for the second month in a row, propelled by boosts in both domestic and export sales. However, output from the start of the year trails behind by 11.7%, with July’s figures showcasing the lowest production since 1953.

Experts cite a combination of high labour costs, intense overseas competition, and the ramifications of Brexit as key factors leading to this slump. Mike Hawes, CEO of SMMT, remarked on the still volatile environment for automotive manufacturing. He stated, “It remains a turbulent time… with weak consumer confidence, volatile trade flows, and significant investment in new technologies underway both domestically and abroad.” He further noted that seeing a consecutive month of increasing car output amidst these challenges is indeed a positive sign.