28th Mar 2025 13:06
(Alliance News) - The UK "reserves the right to respond" to American tariffs, Keir Starmer has said after US President Donald Trump's decision to slap a 25% import tax on cars.
The prime minister said his government was involved in ongoing discussions with the White House aimed at "mitigating the impact" of any levies but that ultimately "our national interest has to come first".
The US is the second largest export market after the EU for cars built in the UK.
Asked whether the UK reserves the right to respond to tariffs during a visit to Yorkshire, he said: "Yes, of course. Obviously, any tariffs are concerning and we're working hard with the industries and sectors likely to be impacted.
"None of them want to see a trade war, which is why we're engaged in discussions with the US about mitigating the impact of tariffs.
"Now, that's what we're working hard on, but in answer to your question, yes – in the end, our national interest has to come first, which means all options are on the table."
Some 16.9% of UK car exports were to the US last year, representing a total of more than 101,000 units worth GBP7.6 billion.
Ministers have said they will take a pragmatic approach towards the threat of tariffs, seeking to strengthen transatlantic trade ties and pursue a wider UK-US economic deal.
On Thursday evening, a Treasury minister suggested the UK has to take a "different approach" to other countries when it comes to negotiating tariffs with the US.
Chief Secretary to the Treasury Darren Jones told BBC's Question Time: "We have to take a different approach in Britain, and look whether it's on the debate on tax or the debate on tariffs, there is no easy answer.
"If there was an easy answer, we would take it, obviously.
"These are complicated issues, but we think we're providing the right type of leadership in negotiating with the Americans."
The import tax on cars is on top of a series of reciprocal tariffs set to come into effect on April 2, which could include a general 20% levy on UK products in response to the rate of VAT.
Starmer's reluctance to hit back with the threat of reciprocal tariffs is driven by fears of the economic harm a trade war would cause.
In its assessment of the UK economy, the budget watchdog warned a full-blown tariff war with the US could wipe 1% off gross domestic product next year and derail Chancellor Rachel Reeves's hopes of balancing the books, forcing her to implement more cuts or tax hikes.
That "worst-case scenario" would come about if Trump imposed 20% tariffs on British goods and the UK reciprocated in kind.
"The UK exports, in terms of goods to the US, around 2% of GDP," Office for Budget Responsibility Chair Richard Hughes told BBC Radio 4's Today programme.
"Car exports are about 10% of that.
"So that's affecting directly UK goods exports of around 0.2% of GDP.
"So what Trump's announced overnight is not the whole of that worst-case scenario, but it's elements of it, and it's the beginning of that risk side."
Shares in UK luxury carmaker Aston Martin Lagonda Global Holdings PLC 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.
Jaguar Land Rover could be one of the UK vehicle manufacturers most affected by tariffs.
Its latest annual report shows 22% of its sales were to North America in the year to the end of March 2024.
Mike Hawes, chief executive of industry body the Society of Motor Manufacturers & Traders, said the announcement of tariffs was "not surprising but, nevertheless, disappointing" and he urged both governments to strike a deal that avoids further damage.
But Liberal Democrat Treasury spokeswoman Daisy Cooper called for the UK to be ready to hit back.
She said: "Our car industry is 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."
Shadow chancellor Mel Stride stressed the need to secure a trade deal with the US to protect against the impact of tariffs.
The US announcement hit carmakers around the world, including in the US where manufacturers rely on parts sourced from outside the country which could incur extra costs.
General Motors Co sank 6.8% while Ford Motor Co dropped 2.6% on US markets.
But Musk's Tesla Inc was up 6.9%, even though he acknowledged the use of parts made overseas meant "the cost impact is not trivial" for his firm.
By Nina Lloyd, David Hughes and Neil Lancefield, PA
source: PA
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