Prime Minister Sir Keir Starmer has warned that the UK will not be “jumping into a trade war” with the United States despite growing concerns over President Donald Trump’s decision to impose a 25% import tax on British cars.
The tariff, which is set to take effect on April 2, could deal a major blow to the UK’s automotive industry, which exports 16.9% of its vehicles to the US, amounting to over 101,000 units worth £7.6 billion last year.
Speaking at a press conference in Paris, Sir Keir described the move as “very concerning” but insisted that the Government would pursue “intense discussions” with Washington to negotiate a way forward.
“I think tariffs are very concerning, there’s no doubt about that. And I’m really clear in my mind that the sector, the industry, does not want a trade war.”
All options remain on the table
While stressing his preference for a pragmatic approach, the Prime Minister confirmed that “all options remain on the table” if negotiations fail.
“Rather than jumping into a trade war, it is better, pragmatically, to come to an agreed way forward on this, if we can. That’s why we’re intensively engaging in the way that we are.”
However, he acknowledged that retaliatory measures could not be ruled out, adding:
“The industry does not want a trade war, but it’s important that we keep all options on the table.”
Economic risks of a trade war
The Office for Budget Responsibility (OBR) has warned that a full-scale tariff war between the UK and the US could have serious economic consequences, potentially wiping 1% off the UK’s GDP next year.
Such a scenario would derail Chancellor Rachel Reeves’ economic plans, forcing the Government to consider spending cuts or tax hikes.
OBR chairman Richard Hughes told the BBC’s Today programme that the worst-case scenario would involve both countries imposing 20% tariffs on each other’s goods, severely disrupting trade flows.
“The UK exports, in terms of goods to the US, around 2% of GDP. Car exports are about 10% of that. So that’s affecting directly UK goods exports of around 0.2% of GDP.”
While the 25% car tariff is not as severe as a blanket trade war, Hughes warned that it could be “the beginning of that risk side.”
UK carmakers take a hit
The tariffs announcement has already sent shockwaves through financial markets, with British luxury carmaker Aston Martin’s share price dropping 6% when the London Stock Exchange opened on Thursday.
Jaguar Land Rover (JLR), which exports 22% of its vehicles to North America, is also expected to be among the hardest-hit manufacturers.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), called the move “not surprising but, nevertheless, disappointing”, urging both governments to find a diplomatic solution.
“We need a negotiated settlement that protects our industry from further damage.”
Calls for tougher action
While the Government remains focused on diplomatic negotiations, opposition voices are urging a stronger response.
Liberal Democrat Treasury spokeswoman Daisy Cooper accused Sir Keir of failing to stand up to Trump, warning that the UK’s car industry was being “left at the mercy of Trump and his destructive trade war”.
“We should be preparing to respond if needed, including through Tesla tariffs that hit Trump’s crony Elon Musk in the pocket.”
Meanwhile, Shadow Chancellor Mel Stride stressed the importance of securing a trade deal to shield British businesses from American protectionism.
“It’s very important the UK has a trade deal with the US that means we are protected from those tariffs.”
Speaking to ITV’s Good Morning Britain, he acknowledged the complexity of the situation, emphasising the need to balance economic and security relations with Washington.
“We want to make sure that we have the right relationship with America on all sorts of levels, including security as well as economic, in order to make sure we get the very best for our country.”
Global impact of Trump’s tariffs
The tariff announcement has not only rattled UK carmakers but has also sent shockwaves across global markets, including in the United States itself.
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Major American manufacturers General Motors (GM) and Ford saw their stocks fall by 6.8% and 2.6% respectively, as they heavily rely on imported parts, which could now face higher costs.
Ironically, Tesla’s shares surged by 6.9%, despite Elon Musk admitting that tariffs could still impact his company.
“The cost impact is not trivial,” Musk acknowledged.
What happens next?
As the April 2 deadline for the tariffs approaches, all eyes will be on Downing Street and the White House to see whether diplomatic negotiations can prevent an escalation.
While Sir Keir Starmer is seeking a deal to de-escalate tensions, the UK Government’s options remain open, with growing calls for retaliatory action if necessary.
For now, the UK’s automotive industry, already dealing with supply chain disruptions and the shift to electric vehicles, faces yet another major challenge—one that could shape the future of UK-US trade relations for years to come.
