What do Trump’s 25% car tariffs mean for Reeves?: ‘She’s back where she started’

Read time: 4 mins

In brief…

• Alongside tariffs on almost all imports from Canada, China and Mexico, President Trump has now introduced a 25% on every car exported to the US, in the hope of boosting the country’s own manufacturing industry.
• The News Agents say the impact of this tariff on the UK economy will put Rachel Reeves back where she started after recent benefit cuts, potentially leading to more “difficult decisions”.
• Donald Trump’s goal appears to be to persuade car manufacturers to move to the US and increase America’s economic growth, but stock markets are down and other tariffs make this an almost impossible task for the big car makers.

What's the story?

The UK will not – it was promised – be among the countries included in import tariffs imposed by Donald Trump.

That was reserved for countries such as Canada and Mexico, from where most exports into America would be subject to a 25% tariff, and all exports from China, which would be slapped with 20%.

Now, the president has announced there will be a 25% tax on all car imports into the US, in a move he says will boost production inside the country, but which will affect all vehicles from every country – including the UK.

And this couldn't have come at a worse time for Britain, which has been working with the US to try to avoid being impacted by Trump's actions.

This week, Rachel Reeves announced a fresh wave of cuts to benefits, and an increased drive to get unemployed people back into work, in an attempt to revive the flagging economy and balance the government's finances.

There were fears that when Trump implemented his tariffs on Canada, China and Mexico, it could result in a global trade war, but this latest move is an unexpected – and direct – blow to the Labour government's plans.

Around eight million cars were imported by the US in 2024, resulting in approximately $240 billion (£186 billion) in sales.

In 2023, the UK exported £6.4 billion of cars to the US, which accounted for 18.4% of all British overseas car trade, and a 25% tax on a similar amount in the coming years could almost entirely wipe out the savings Reeves, and the Labour government, have attempted to claw back into the economy.

Trump has said the move will spur "tremendous growth" in the US, resulting in new jobs and investment in internal car manufacturing.

Emily Maitlis says the timing of Trump's announcement, so close to Reeve's Spring Statement, is "so bad it almost feels deliberate", and says Trump is like an “orange-faced tsunami blowing at you from across the Atlantic.”

What Trump’s car tariff means for the UK - and Rachel Reeves

The News Agents describe Reeves' Spring Statement as a "finely tuned" announcement, which left the chancellor just enough headroom to bring stability back to the government's finances – damaged so greatly, as we have been repeatedly told, by the £22 billion black hole inherited from the previous Tory government.

Trump's new tariffs set her back to square one, at best.

"Trump has, in one move, put her right back in the same place that she was before she started planning the welfare cuts," says Emily.

"Before she started planning what she calls savings and we call cutting, before she started looking at disability and PIP and the kind of measures that would be affecting a huge number of people in very detrimental ways."

Reeves' response on the day of the announcement was to say the government hopes the car tariff is not implemented.

But if it does come to pass, it could have a major impact on people across the UK, with estimates after her Spring Statement suggesting 250,000 people could be pushed into poverty if the government's plan to get people back into work doesn't work out.

"Is it possible now that actually the number of people who might go into relative poverty as a result of Rachel Reeves' financial statement will instead go into relative poverty because of Donald Trump? That is such a weird thought to have in your head," says Jon.

He adds that while Labour MPs may tell the media the pandemic is to blame, or the war in Ukraine – that is no longer true.

"It's Donald Trump," he says.

What Trump ultimately wants from his car tariffs, is to persuade car manufacturers to move their operations to the US, to avoid the new 25% tax.

But this will continue to cause problems as many car parts are sourced from Canada, China or Mexico, meaning unless every vehicle produced is made entirely from US components, tariffs and taxes will still prove a massive headache for producers.

"I think it's going to be very difficult for car manufacturers to work out what to do," says Emily.

But it's not just the UK that doesn't want to see this happen – a fall in share prices in US car manufacturers suggests that what Trump is proposing isn't popular across the Atlantic either.

"This is hurting American business as well," says Jon Sopel.

"It may be that there's going to be massive inward investment over the years, and Hyundai – and whoever else – will announce their interests to set up factories in America, but it will take years.

"The idea that this is going to transform American manufacturing overnight, is ridiculous, but a trade war will affect the global economy."

Listen to the latest episode of The News Agents.