UK-US trade deal on vehicles partially implemented

US president Donald Trump has signed off on a deal that will reduce tariffs on vehicle imports from the UK to 10%, down from the additional levy of 25% that had been threatened by the US, but failed to address the removal of tariffs on steel and aluminium.

The US tariff on steel and aluminium imports is currently 50%, but is lower for UK imports at 25%.

Trade talks between the UK and the US have been largely positive for the automotive industry since May, when both countries reached the agreement for the trade deal that includes reducing US vehicle import tariffs from the UK from the additional 25% levy to 10%, with a 100,000-vehicle annual cap.

Automotive industry groups in the UK, such as the Society of Motor Manufacturers and Traders (SMMT), welcomed the implementation of the deal as “great news”.

Mike Hawes, chief executive of the SMMT said: “That the UK has secured a deal which makes automotive a priority, ahead of many competitors equally eager to safeguard their own trade, should be recognised as a significant achievement. We now await details on how it will be administered.”

Hawes added that further progress for the UK automotive industry came at the recent G7 summit, as Canada announced it will seek to ratify the UK’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement with 11 other countries including Canada, Mexico, Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam.

The UK was the first European country to join the trade bloc in December last year, but Canada and Mexico did not ratify its accession, meaning UK automakers were not able to trade with the two countries under the agreement. Now that Canada seeks to ratify the UK’s position in the bloc, the two countries can trade under the Pacific-rim pact.

“Diversity of export markets is important, particularly given the international headwinds our industry faces, so these latest developments – coming on the heels of recently improved UK trade relations with India and our largest market, the EU – do matter,” said Hawes. He added that the CPTPP will safeguard jobs and economic growth and provide a platform for future growth based on “an unequivocal commitment to free and fair trade, the avoidance of tariffs on all automotive products, enhanced customs cooperation and regulatory partnership”.

There is still confusion over rules of origin for both vehicles and parts, particularly with the tariffs of 25% still on steel and aluminium.

At this week’s SMMT summit, Hawes said: “The rules of origin that we're facing must be more open. We need to secure renewed investment in battery production, localisation and shared supply chains. We need to avoid tariffs and build that closer relationship and deeper understanding of what it is that makes the UK competitiveness.”

He added: “The government's made an excellent start, but it must be a start, not the end. We need to turn that strategy into actual action to make sure we remain and can re-secure our position as one of the best places in the world to invest in automotive.”