US and UK Reach Auto Tariff Agreement: Trump Describes It as "Exclusive Treatment for the UK," Tariff on an Annual Quota of 100,000 Vehicles Reduced to 10%

Taiwan • Politics • 05/12 12:25
US and UK Reach Auto Tariff Agreement: Trump Describes It as "Exclusive Treatment for the UK," Tariff on an Annual Quota of 100,000 Vehicles Reduced to 10%

On May 8, 2025, the United States and the United Kingdom announced a limited tariff agreement covering automobiles, steel, and aluminum. The U.S. will reduce tariffs on up to 100,000 British cars imported per year from 27.5% to 10%, with any cars beyond this number still subject to the 27.5% tariff. Former President Trump called this a "special treatment for the UK." The agreement was announced on Victory in Europe Day, highlighting the Anglo-American alliance. Although the agreement still requires negotiations on legal and technical details, it has already provided reductions in tariffs and export guarantees for the British automotive industry.

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05/12 12:25

US and UK Reach Auto Tariff Agreement: Trump Describes It as "Exclusive Treatment for the UK," Tariff on an Annual Quota of 100,000 Vehicles Reduced to 10%

On May 8, 2025, the United States and the United Kingdom announced a limited tariff agreement covering automobiles, steel, and aluminum. The U.S. will reduce tariffs on up to 100,000 British cars imported per year from 27.5% to 10%, with any cars beyond this number still subject to the 27.5% tariff. Former President Trump called this a "special treatment for the UK." The agreement was announced on Victory in Europe Day, highlighting the Anglo-American alliance. Although the agreement still requires negotiations on legal and technical details, it has already provided reductions in tariffs and export guarantees for the British automotive industry.

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Summary of the US-UK Automotive Tariff Agreement

According to the agreement details released by both parties, the US will implement a "tariff rate quota" system for car imports from the UK. Specifically, the first 100,000 UK-made cars each year will enjoy a preferential tariff of 10%, significantly lower than the previous 27.5% rate imposed by the Trump administration. This quota nearly covers the entire volume of UK car exports to the US in 2024—approximately 101,000 vehicles.

Vehicles outside the quota will still face a high tariff of 27.5%, a design seen by the industry as a "punitive clause" that may limit the growth potential of UK car exports. Mike Hawes, chairman of the Society of Motor Manufacturers and Traders (SMMT), stated that this agreement provides the UK automotive industry with a "long-awaited relief measure," helping to stabilize employment and capacity planning.

Trump Emphasizes "Exclusive Treatment for the UK"

Former US President Trump, when announcing the agreement, clearly pointed out that this tariff reduction is an "exclusive treatment" for the UK and will not be replicated for other countries. He emphasized that UK cars like Rolls-Royce and Bentley are "highly exclusive ultra-luxury cars" and do not directly compete with US domestic models, thus warranting special arrangements.

Trump further stated, "Unless vehicles from other countries can match Rolls-Royce, they will not be included in the quota range." This statement was also interpreted as a clear signal to major car-exporting countries like Japan and Germany, indicating that the US will not easily make concessions on automotive tariff issues.

Symbolic Timing of the Agreement Announcement

The agreement was announced on May 8—Victory in Europe Day, marking the end of World War II in Europe. UK Prime Minister Rishi Sunak noted that the announcement time almost coincides with the moment former Prime Minister Churchill declared victory. This move is seen as a symbolic arrangement to strengthen the historical alliance between the US and the UK.

Trump described the agreement as "epoch-making" and stated that it is his first major trade achievement since returning to the White House. Although the agreement is currently in the preliminary framework stage, both parties expect to complete negotiations on the legal text and implementation details in the coming weeks.

Tariff Changes and Quota Details

The core terms of the agreement include:

  • The US will reduce the import tariff on UK cars from 27.5% to 10%, applicable to the first 100,000 vehicles per year;
  • Vehicles exceeding the quota will still be subject to the high tariff of 27.5%;
  • The UK's car export volume to the US in 2024 is about 101,000 vehicles, almost matching the quota limit;
  • The US retains a 10% base tariff on most UK goods;
  • The UK currently imposes a 10% tariff on US car imports, with no announced adjustments.

Additionally, Trump announced that Rolls-Royce engines and aircraft parts will be exported to the US tariff-free, and revealed that the UK will purchase $10 billion worth of Boeing aircraft from the US.

Steel and Aluminum Projects Also Granted Tariff Exemptions

Besides automobiles, the agreement also covers UK exports of steel and aluminum products to the US. The US has removed the previous 25% tariffs on these metals, providing breathing space for the UK steel industry. According to UK government data, although the total value of UK steel and aluminum exports to the US is only about £700 million, related derivative products (such as fitness equipment, furniture, and machinery) have export values reaching £2.2 billion, accounting for about 5% of the UK's total exports to the US.

It is currently unclear whether the exemption applies to all steel and aluminum derivatives or only to products smelted and cast in the UK.

Other Items Pending Negotiation

Although preliminary consensus has been reached on automotive and metal projects, further negotiations are needed in other areas, including:

  • Pharmaceutical tariffs: UK pharmaceuticals are the second-largest export item to the US, with an export value of £6.6 billion in 2024, but no clear agreement has been reached;
  • Digital services tax: The UK's 2% digital services tax on US tech companies remains unchanged;
  • Agricultural products: The UK has removed tariffs on US beef and other agricultural products and obtained a duty-free export quota of 13,000 metric tons, but the UK government emphasizes that it will not lower food import standards;
  • Ethanol: The UK will reduce the 19% tariff on US ethanol to zero, with a quota limit of 1.4 billion liters.

Official Statements and Industry Responses

UK Chancellor Rachel Reeves stated that the UK is willing to reduce the import tax rate on US cars from 10% to 2.5% to promote bilateral trade. The UK Secretary of State for Business emphasized that without an agreement, the UK automotive industry could face the risk of large-scale layoffs.

The US White House stated that this agreement will serve as a "tone reference" for future negotiations with other trade partners, but whether it will extend to other countries remains undecided. The American Automotive Policy Council expressed dissatisfaction with the agreement, believing it may give UK car manufacturers an unfair advantage in the US market.

References

People Also Ask...

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What will be the long-term impact of the UK-US automotive tariff agreement on the British automotive industry?

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Why does the United States only cut tariffs for British cars and not for cars from other countries?

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Might other countries also seek similar treatment following the US's decision to lower tariffs on British cars?