Britain is desperately seeking to strike a deal to avoid Donald Trump’s tariffs on car imports to the US which threaten to deal a huge blow to the UK’s motor industry.
Chancellor Rachel Reeves said the Government was in “intense talks” to try to reach an agreement so the levies are not imposed on the UK.
“A million British people work for American firms. A million Americans work for British firms,” Ms Reeves told Times Radio.
“Our two economies are so closely intertwined.
“I believe, and we make this case to the United States, that free trade, fair trade is good for both of our countries. But let’s see where we get to in the next few days.”
But the Government will be closely scrutinised for any concessions it makes to the Trump administration, including possibly watering down a digital services tax, to favour US tech giants.
The Chancellor added that the UK is not planning “at the moment” to introduce retaliatory tariffs on America.
The White House announced the import tariff on Wednesday, claiming it will boost domestic manufacturing and protect US jobs.
The move deals a serious blow to the British automobile industry, which exported some £6.4 billion worth of cars to the US in 2023 - nearly one fifth of all UK’s vehicle exports.
Last year Jaguar Land Rover sold 116,294 vehicles to the US, its biggest export market.
Shares in carmaker Aston Martin dropped sharply when stock markets opened on Thursday morning.
The firm, which is listed on the London Stock Exchange, saw its share price fall about 6% shortly after opening.
Trump’s tariffs move came only hours after Britain’s budget watchdog warned that the levies could force Ms Reeves to raise taxes or cut spending.
Britain’s car industry has hit out at Trump’s decision to put 25% tariffs on imported vehicles, which has heightened fears of a global trade war.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), warned the move risks hurting both UK and US manufacturers and consumers.
Mr Hawes said it was “not surprising but, nevertheless, disappointing” and urged both governments to strike a deal that avoids further damage.
Announcing the tariffs on Wednesday night, the US president claimed: “This will continue to spur growth. We’ll effectively be charging a 25% tariff.”
He added that the tariffs would be “permanent”, as opposed to some of his other levies which have been used as temporary bargaining chips.
The latest tariffs could be complicated as even US car makers source their components from around the world, meaning that they could face higher costs and lower sales. Shares in General Motors fell by about 3% in Wednesday afternoon trading. Ford’s stock was up slightly, but shares in Stellantis, the owner of Jeep and Chrysler, dropped nearly 4%.
Canadian Prime Minister Mark Carney said Trump’s auto tariffs are a “direct attack” on his country.
The tariffs are part of a broader reshaping of global relations by Trump, who plans to impose what he calls “reciprocal” taxes on April 2 that would match the tariffs and sales taxes charged by other nations.
He has already placed a 20% tax on all imports from China for its role in the production of fentanyl. He similarly placed 25% tariffs on Mexico and Canada, with a lower 10% tax on Canadian energy products.
Parts of the Mexico and Canada tariffs have been suspended, including taxes on cars, after firms objected and Mr Trump responded by giving them a 30-day reprieve which is set to expire in April.
The president has also imposed 25% tariffs on all steel and aluminium imports, removing the exemptions from his earlier 2018 taxes on the metals. He also plans tariffs on computer chips, pharmaceutical drugs, lumber and copper.
