Drivers set to benefit as UK and US cut car tariffs
May 08, 2025 by Siobhan Doyle
Car changing is a big deal
Car buyers could see lower prices as the UK and US reach a new trade deal aimed at cutting car import costs and easing market access.
The UK and the US have announced a trade deal that includes a significant reduction in car import tariffs, lowering them from the previously imposed rate of 25%.
US Secretary of Commerce Howard Lutnick confirmed that the UK will be allowed to export up to 100,000 cars to the US under a reduced 10% tariff — down from the previous rate of 27.5%.
This quota nearly matches the total number of UK vehicles exported to the US last year, driven largely by Jaguar Land Rover (JLR), which sold around 100,000 cars in the American market last year. The news is likely to come as a relief to the British car manufacturer.
The deal was announced following a phone call between UK Prime Minister Keir Starmer and US President Donald Trump, which was reportedly full of warm words and mutual praise.
“For great British cars, this deal means US tariffs will now be cut from 27.5% to 10% on up to 100,000 vehicles annually,” Starmer said during a separate press conference at a JLR site in the West Midlands. “This is a significant and important reduction, and I know how much this has been weighing on people’s minds.”
Last month, the Prime Minister visited JLR, where he pledged greater support for British carmakers amid global economic headwinds. During the visit, he told workers he would accelerate trade agreements to protect their jobs, safeguard livelihoods, and promote British industry on the world stage.
What do reduced tariffs mean for UK drivers?
These tariff reductions could bring noticeable changes for UK drivers – most of them positive. Tariffs, which are essentially taxes on imported goods, directly influence the prices you pay for cars, fuel, and car parts. When these are reduced, the effects can ripple across the driving experience in the UK.
One of the most immediate benefits you may notice is a drop in car prices, particularly for imported models. Whether it’s a popular Japanese hatchback or a high-performance German saloon, lower tariffs mean these cars can be brought into the UK at a lower cost. That saving is often passed on to buyers, making new cars more affordable.
Parts for maintenance and repairs – many of which are sourced from abroad – could also become cheaper, helping to reduce long-term ownership costs.
Fuel is another area where reduced tariffs could make a difference. If tariffs on imported oil or refined fuel components are lowered, petrol and diesel prices at the pump could stabilise or even decrease. While global oil prices still play a major role, tariff changes can soften the impact on consumers, offering some relief from fluctuating fuel costs.
Beyond cost, you may also see more variety in the cars available on the UK market. Lower import costs could encourage manufacturers to offer a broader selection of models, particularly in emerging sectors such as electric and hybrid vehicles, which are often produced overseas.
The other side of the coin
There are potential downsides to reduced tariffs. As imported cars become more competitively priced, UK-based car manufacturers could face increased pressure. This heightened competition might affect investment in domestic production and could have implications for employment in the automotive sector.
While reduced tariffs won’t directly lower insurance premiums, road tax, or MOT costs, they can still influence the overall cost of car ownership. For example, if parts and repairs become cheaper, insurers may lower premiums slightly over time due to reduced claims costs.
The industry has its say
Following the announcements, Philipp Sayler von Amende, Chief Commercial Officer at Carwow, described the UK-US tariff deal as a much-needed boost for the automotive industry.
“The agreement to lower tariffs to 10% is a significant relief for the British car sector,” he said. “The previous 27.5% rate was unsustainable — particularly for premium UK brands that rely heavily on the US market. While the new rate offers vital breathing room, it currently applies only to a 100,000-vehicle quota, though there is hope this could expand in future negotiations.”
Sayler von Amende also pointed to growing trade pressure on the EU, noting that “manufacturers in France, Germany, and Italy remain exposed to a 25% tariff, and Brussels will now face calls to secure similar terms to protect European competitiveness.”
Despite the deal, he warned that wider challenges persist. “Economic uncertainty remains the bigger obstacle for UK dealers and consumers. New car registrations fell by over 10% in April — the sixth decline in seven months — driven by rising costs, tax changes, and low consumer confidence. Still, with this trade breakthrough and possible Bank of England rate cuts on the horizon, there’s cautious optimism that demand may soon rebound.”
Adrian Mardell, Chief Executive Officer of Jaguar Land Rover, said the deal offered much-needed stability for a key UK sector.
“The car industry is vital to the UK’s economic prosperity, supporting 250,000 jobs across the country,” he said. “We welcome this agreement, which provides greater certainty for our sector and the communities that depend on it. We thank both the UK and US governments for reaching this deal swiftly and look forward to continued collaboration in the months ahead.”
Meanwhile, Mike Hawes, SMMT Chief Executive, said: “The agreement announced today to reduce tariffs on UK car exports into the US is great news for the industry and consumers. The application of these tariffs was a severe and immediate threat to UK automotive exporters so this deal will provide much needed relief, allowing both the industry, and those that work in it, to approach the future more positively.
“The government has recognised the importance of the automotive industry to UK exports and the wider economy and has worked quickly and tirelessly with US counterparts to strike an agreement. We hope that it will lead to broader and deeper cooperation that reduces barriers to trade still further, charting a path to economic growth for both nations.”
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