- British Cars Get Tariff Break, Leaving US, Canada, and Mexico Fuming
The recent trade agreement between the United States and the United Kingdom is sparking anger among North American auto industry executives. Under the terms of an agreement announced on May 8 by the Trump administration, British vehicles imported into the U.S. are subject to a reduced customs tariff of 10 percent, compared to up to 25 percent for vehicles from Canada and Mexico.
This is not sitting well with major American automakers. Ford, GM and Stellantis have production chains that are highly integrated across North America. They charge that the tariff favoritism destabilizes the competitive advantages conferred by the United States–Mexico–Canada Agreement (USMCA).
A blow to the North American sector
Currently, vehicles from Canada and Mexico must meet strict North American content rules to avoid full tariffs of 25 percent. A $50,000 USD vehicle from Canada or Mexico, with less than 60 percent of its parts originating from the U.S., is taxed more heavily than an equivalent model from the UK, which pays 10 percent, regardless of its composition.
UK applauds, Detroit fumes
Across the pond, reaction has been positive, of course. Mike Hawes, President of the Society of Motor Manufacturers & Traders, hailed the agreement as a welcome relief for the UK auto industry, which was facing immediate surcharges. But in Detroit, the American Automotive Policy Council, which represents the Big 3, sharply criticized the agreement.
A renegotiation of USMCA on the horizon
Although the USMCA was an initial priority for the Trump administration, current negotiations with other economic blocs seem to have relegated it to the background. However, a review of the tripartite agreement is scheduled for 2026, suggesting a more aggressive renegotiation, particularly on rules of origin in the automotive sector.
Concessions coming for Canada and Mexico?
According to Michael Robinet, VP at S&P Global Mobility, it’s likely that tariffs for Canadian and Mexican vehicles will be revised downwards in the coming months, following the model granted to the United Kingdom.