UK luxury car makers face tariff quota tug-of-war: Chris Bryant

Key topics:US cuts tariffs on UK cars to 10% for first 25k vehicles per quarterQuota sparks competition, risks squeezing smaller luxury automakersIndustry urges UK to ensure fair quota rules or seek higher US cap.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here..By Chris Bryant.Britain’s luxury-car manufacturers were relieved in May when the US agreed to lower tariffs on their exports to 10% from the 27.5% rate they were facing before.While the UK-US agreement will help safeguard jobs and the headline tariff rate is superior to the 15% duty the US is set to apply to vehicles from the European Union, it has a potentially aggravating catch: the 10% import tax will apply to the first 25,000 UK vehicles arriving in the US each quarter; whereas those exceeding the cap will be charged 27.5%.British automakers could be forced to compete with one another to secure the preferential rate. The UK government should intervene to prevent a dogfight, but how? .To recap, the tariff quota is set just below the roughly 102,000 vehicles the UK exported to the US last year, meaning most shipments will pay the lower rate, which is good news. Nevertheless, the risk of having to pay far more is causing “some paranoia” in the UK car industry, a top lobbyist recently acknowledged.At first glance, applying the 10% tariff on a “first come, first served” basis sounds unproblematic — after all, tariff quotas commonly operate on this principle.However, this incentivises automakers to ensure their vessels dock ahead of rivals, threatens to squeeze out low-volume producers and makes planning more difficult. (Coordinating deliveries with competitors might have antitrust implications.) .Read more:.Trump threatens extra 10% tariffs on BRICS nations for anti-American policies, escalating global trade tensions.Although the pro-rata UK allocation for 2025 will likely be sufficient — in part because some manufacturers frontloaded US shipments this year to avoid higher tariffs — the quota is bound to cause difficulties at some point, and possibly as soon as next year.Plus, over the long-term it will act as a brake on UK manufacturers increasing their sales in the US, a key growth market — particularly now that the Chinese market has become far more competitive. US exports represent around 13% of UK car production, however, for some British automakers the US accounts for between 30% and 50% of their output. Making matters more complicated is that Britain’s US car exports are highly unbalanced: Jaguar Land Rover Automotive Plc is by far the largest, having shipped around 84,000 vehicles to the US in its fiscal year ending in March. So that doesn’t leave much room for BMW AG-owned Mini and Rolls-Royce Motor Cars Ltd., Bentley Motors Ltd., Aston Martin Lagonda Global Holdings Plc, McLaren Automotive Ltd. and Lotus Technology Inc. — not withstanding most of these build only a few thousand cars per year. In written evidence to parliament, the Society of Motor Manufacturers and Traders said the quota doesn’t guarantee “equitable treatment” and is “inherently challenging, particularly for small volume manufacturers and businesses operating on a strict build-to-order basis.”There are already signs of sharp elbows, with Aston Martin Chief Executive Officer Adrian Hallmark telling Bloomberg News last month the deal risks becoming a “JLR tariff agreement” while smaller manufacturers get “squashed.”Bentley CEO Frank-Steffen Walliser has also questioned how the quota will operate in practice: “Is the 100,000 for Bentley? I can live with that,” he told Financial Times car summit in May. But “I assume our colleagues from JLR would also like to have a chunk.”JLR Chief Financial Officer Richard Molyneux weighed in last week, telling analysts it also wanted “some rules and structure brought in” because a “free-for-all almost certainly will do nobody any good.”A UK government spokesperson told me it’s “working with industry to ensure the quota works effectively and fairly” but didn’t provide details. So what’s to be done? Aston Martin has called for the quota to include categories, such as reserving part of it for high-end sports-cars. No wonder: Limited edition models like its hybrid Valhalla supercar cost around $1 million, so applying the higher tariff rate would be painful.Another solution would be to allocate the quota based on last year’s sales volumes. However, doing so risks favouring incumbents over new entrants or those anticipating much higher sales in future. One could even imagine auctioning the tariff quota so those who value the 10% rare most are the ones guaranteed to receive it. (JLR’s customers are probably the most price sensitive because its vehicles sell for a bit more than £70,000 ($95,000) on average, whereas some of its peers charge multiples of that; an electric Rolls-Royce Spectre starts at around $400,000.) This all sounds complicated and potentially divisive, though, so in an ideal world the UK would just persuade the US to increase the cap to a level that allows UK car exports to grow at a reasonable rate. After all, high-end UK automakers don’t have all that many US rivals and most are too small to justify building a US factory, so where’s the harm?Besides the obvious difficulty of getting Trump to make trade concessions I can think of one potential problem: the US president might be particularly averse to helping Jaguar.The British marque is winding down sales ahead of its relaunch as an entirely electric brand in 2026, a strategy that’s already been widely mocked for its unorthodox design and marketing. Last week Trump piled on with a Truth Social post asking “Who wants to buy a Jaguar after looking at that disgraceful ad.”If Jaguar’s rebranding is the “disaster” Trump claims, then it won’t be selling all that many cars to Americans (I disagree). And in any case Jaguar’s new strategy is to sell fewer cars at higher prices, which might help in managing the tariff quota. This prickly situation will doubtless be resolved one way or another, but it underscores the uncertainty and confusion Trump’s tariffs are causing. Even a supposedly favourable UK trade deal has turned out to contain a can of worms..© 2025 Bloomberg L.P.

UK luxury car makers face tariff quota tug-of-war: Chris Bryant

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