US-UK auto trade deal lowers vehicle import tariffs to 10% but caps UK exports at 100,000 vehicles

The US and the UK have reached a trade deal, including reducing US vehicle import tariffs for the UK from the additional 25% levy to a maximum of 10%, with a 100,000-vehicle annual cap. Tariffs on British steel and aluminium imports to the US – which had also been levied at 25% – have also been cut to 0%, according to the UK government. 

Certain details are still limited at this time, and the timing of a wider agreement appears still to be determined. However, other sectors will also see reductions in US tariffs, including aerospace, however the 10% ’reciprocal’ tariffs on other goods from the UK remains, along with the 25% tariff on certain automotive parts, which was implemented May 3. In return, the UK has dropped tariffs on certain food and agricultural products, and has also indicated that it would reduce its 10% tariff on vehicle imports for the US, though this change does not yet appear to be have been confirmed. 

The agreement in its current form does offer some relief to the automotive industry in the UK, as it’s a considerably better trade arrangement than the 25% tariff announced in April, which has been levied on top of the existing 2.5% tariff for most vehicle imports to the US.

However, the quota of 100,000 vehicles puts a cap on this relief. It’s also still significantly higher than the previous tariff of 2.5% on imports to the US that was in effect prior to US president Donald Trump’s ‘Liberation Day’ tariffs. 

The cap of 100,000 vehicle imports to the US roughly matches the UK’s vehicle exports to the country, which in 2024 amounted to around 102,000 vehicles, according to figures from the Society of Motor Manufacturers and Traders (SMMT). However, the cap does put a ceiling on the UK’s vehicle exports to the US, meaning any vehicles exported above the 100,000 quota will be tariffed at the rate of 27.5% (25% plus 2.5% base tariff). 

The deal will likely ease some uncertainty for UK-based OEMs including JLR, which produces most of its vehicles in the UK and exports them to the US. Because of its exposure to heavy tariffs, JLR had initially announced in April that it would pause shipments to the US, but restarted shipments earlier this week.

Speaking to US president Donald Trump from JLR’s facility in the West Midlands, the UK prime minister Keir Starmer said: “This is going to boost trade between and across our countries, it’s not only going to protect jobs but also create jobs, opening market access.”

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Trump added that the UK will be “fast tracking US goods through their customs process,” claiming that “there won’t be any red tape, it’s going to be fast both ways”.

However, no further details have been released, with Trump announcing more details to come in the coming weeks. This is a limited trade deal rather than a more comprehensive free trade agreement, so it still leaves wider economic uncertainty which will play a role in global automotive trade and how supply networks operate.

Earlier today, ahead of the trade deal announcement, Trump had posted on social media hinting that similar deals could be announced for other countries. “The agreement with the UK is a full and comprehensive one that will cement the relationship between the US and the US for many years to come,” he said. “Because of our long-time history and allegiance together, it is a great honour to have the UK as our first announcement. Many other deals, which are in serious stages of negotiation, to follow.”

In the following press conference at the Oval Office, Howard Lutnick, US secretary of commerce seemingly addressed other countries and said: “We did a deal with them [the UK] on automobiles. If you’re not building here, you’re charged 25% on vehicles. Trump agreed they could send 100,000 cars into America and only pay a 10% tariff, and that protects their car industry.”

Lutnick added: “You can work with us on autos, if you have a supply chain that is secure and protected in national security.”

Earlier this week, a report commissioned by the Mayor of the West Midlands, Richard Parker, and prepared by Steve Rigby, Co-CEO of Rigby Group found that securing a trade deal within weeks not months would be essential to “avoid structural damage” to businesses across the region, “many of which are essential to the UK’s £13bn automotive industry.”

The report said that a “less than perfect trade deal after 45 days is preferred by businesses to an improved one after 180 days”. Not reaching a deal would have had serious consequences for the West Midlands automotive sector within weeks, it said, adding that more than half of businesses would’ve downgraded their profit forecasts by the end of the year if this scenario had occurred.

Of course, the trade deal between the US and UK does not completely alleviate pressure on the automotive logistics network in either country, or elsewhere. There are still parts tariffs of 25% being implemented on imports from the UK, and elsewhere vehicle import tariffs are 25% or more.

Alongside this, costs are rising further, with more than half of the US freight sector bracing for vehicle cost inflation due to the tariffs. According to logistics technology firm Tech.co’s latest survey, 58% of US freight firms are preparing for soaring vehicle and equipment costs, while 66% say the tariffs have already impacted their operations.

The survey also found that 23% of freight firms view rising diesel costs as the biggest problem currently.

Jack Turner, editor of Tech.co said: “It will take a while before the true cost of 2025’s tariffs onslaught catches up with the industry, but already, cracks are starting to show. Huge incoming increases in vehicle and equipment costs could well see companies resist updating their fleets, kicking the can down the road and making do with aging and inefficient trucks and tools for some time.”

We will update this story with more information as it becomes available…