BCC: Tariffs will sap business confidence and hurt UK manufacturers
The British Chambers of Commerce has warned that the new 25% tariff on car imports to the US will hurt business confidence.
The BCC says the impact on the UK car sector “cannot be overstated”, given the importance of the US market for British manufacturers.
William Bain, BCC head of trade policy, explains:
“Businesses were already looking with trepidation towards next week’s planned reciprocal tariffs before this fresh upheaval was announced.
“Around half of the cars purchased in the US are imported so this will pass through into much higher costs for US consumers. If fully extended to all components it will affect supply chains too.
“The impact of this on the UK car industry cannot be overstated. Cars are the UK’s biggest goods export to the US, with £6.4bn in sales in 2023, led by iconic manufacturers such as Aston Martin, Jaguar, and Land Rover.
“Piling these tariffs on top of the others already expected on 2 April, will sap business confidence and add further uncertainty for both UK and US firms.
“We urge the UK Government and the US Administration to continue intensive dialogue over the coming days and weeks to reach a mutually beneficial agreement on technology and trade.
“This needs to provide certainty for business and consumers alike on the future tariff landscape and remove unnecessary levies already in place.”
Kathleen Brooks, research director at XTB, reports that tariffs are “dominating market sentiment”, as investors calculate the impact of the trade dispute:
European stocks have opened sharply lower after President Trump announced a 25% levy on imports of cars and car parts coming into the US. This news has had an immediate effect on share prices, the US imports 8 million cars a year and untold car parts, which equates to $240bn in trade.
Unsurprisingly, the biggest decliners on the Eurostoxx index include Ferrari, Volkswagen, BMW and Mercedez Benz Group.
European stock markets have hit a two-week low, after Donald Trump announced a new 25% tariff on car imports to the US.
Automakers’ shares have been hit, with BMW down 2% in late-afternoon trading and Volkswagen 1.3% lower.
US manufacturers have fallen too – with General Motors falling 7%, as it will also face a tariff on cars manufactured outside the US and on imports of components.
UK chancellor Rachel Reeves has suggested Britain does not want to retaliate.
She told Sky News:
“We’re not at the moment in a position where we want to do anything to escalate these trade wars.
“We are looking to secure a better trading relationship with the United States,”
British Steel plans to close its two blast furnaces and steelmaking operations in Scunthorpe, putting up to 2,700 jobs at risk in a move unions called “devastating”.
The company, which is owned by China’s Jingye, said it would immediately start consultations with its workforce and unions on redundancies stemming from the planned closures alongside a reduction of steel rolling-mill capacity.
The closures affect between 2,000 and 2,700 workers out of a workforce of about 3,500, British Steel said, and will bring an end to steelmaking in Scunthorpe after 160 years of production.
Lower-income households are on track to become £500 a year poorer by the end of the decade as a result of the UK chancellor’s spring statement, according to analysis by a leading thinktank.
The Resolution Foundation said a combination of weak economic growth over the next five years and benefit cuts that fell disproportionately on lower-income households would result in an average annual loss of £500 in 2030 for those in the poorest half of the population.
Some pharmaceuticals firms are sending more medicines by air to the US than usual, in an attempt to front-run President Donald Trump’s 2 April tariffs announcement.
Two European-headquartered drugmakers told Reuters this week they are sending as much of their medicines across the Atlantic as possible over the past several weeks and heard other pharmaceuticals companies were doing the same.
Gaurav Ganguly, senior director for economic research at Moody’s Analytics, warns that the consequences of the new US car tariffs are significant:
“A number of European countries are in the immediate firing line, including Sweden and Germany. If the policy remains in place, the consequences for consumer confidence and employment in the auto sector and beyond are severe.
European, Japanese, South Korean and Chinese manufacturers all face plummeting demand from U.S. buyers. While the stated intention is to use tariffs to raise revenue for tax cuts, this is unlikely to happen if U.S. consumers don’t buy tariffed products. For automakers, offering deep discounts to these consumers might offer some short-term relief but is clearly unsustainable, while this degree of policy volatility makes it harder to shift production to the U.S. with confidence.”
Jess Ralston, analyst at the Energy and Climate Intelligence Unit (ECIU) has argued that jobs didn’t have to be at risk in Scunthorpe:
“Job losses are devastating for anyone, but particularly in a community like Scunthorpe that relies heavily on the steelmaking industry. It did not have to be this way. While steel production in the UK has been declining since the 1970s, long before climate commitments, China has been ramping up its production and undercutting other manufacturers across the world. A phased transition to the steel industry of the future, including hydrogen, could have kept these jobs in communities that need them.
Clearly, we cannot afford to stick to the status quo. The EU recently published its Steel Action Plan and countries like the US are making moves to ensure they have a steel industry thats able to go green as the rest of the economy does. Many in Scunthorpe will be worried about their jobs, wondering what our long-term plan is, and whether we’ll be able to compete with the rest of the world for this industry of the future.“
Trade Secretary Jonathan Reynolds has declined to rule out changing taxes on major tech firms in exchange for exemptions from US tariffs, but insisted they would pay “a fair amount of tax”.
Speaking at a trade conference hosted by Chatham House, Mr Reynolds suggested ministers were willing to discuss the digital services tax (DST) with their US counterparts.
Reynolds explained:
“We have always been of the view as a country that this has to be something ideally agreed on an international basis, but it’s not that DST has been put in place as something that can never change or we can never have a conversation about it.”
Airline travel between Canada and the US is “collapsing” amid Donald Trump’s tariff war, with flight bookings between the two countries down by over 70%, newly released data suggests.
According to data from the aviation analytics company OAG, airline capacity between Canada and the US has been reduced through October 2025, with the biggest cuts occurring between the months of July and August, which is considered peak travel season. Passenger bookings on Canada to US routes are currently down by over 70% compared to the same period last year.
Comparing the available bookings from March 2024 to March 2025, OAG looked at how many people have booked trans-border flights in the six-month period between April through September. It found that the number of tickets booked is down anywhere from 71% to 76%.
Is this real? I can't believe it.
These are forward flight bookings from Canada to the US.
Traders are concluding that the new 25% tariff on cars, and imported auto parts, will hurt the US car industry.
GM, Ford, and Stellantis build vehicles in Canada, Mexico, and China, and would also face higher production costs due to tariffs’ effect on the auto supply chain.
Downing Street said the Government had made a “generous offer” to British Steel, ahead of its decision to propose closing steelmaking in Scunthorpe.
The Prime Minister’s official spokesman said:
“We’ve made a generous offer to British Steel designed to deliver a sustainable future for staff, industry and the local community… we’ve got a two and half billion pound plan to rebuild the sector.
“We will continue to work with British Steel and with the company’s owners to secure its future and deliver on a good outcome.
“But we’ve made that offer and that’s obviously up to the company involved.”
As flagged earlier, there are reports that Jingye Group turned down a £500m offer of support.
They have examined which countries export most autos to the US as a share of their own GDP. Mexico and Slovakia appear very heavily exposed, with these exports accounting for 4 to 6% of GDP. Shares for Korea, Canada and Japan are 1 or 2%.
However, to get a better picture, they’ve also examined the “domestic value added dependent on exports of autos and parts to the US”, which strips out the impact of components bought overseas (eg, if a German carmaker used parts imported from Slovakia, the value added by Slovakia should be excluded)
On this basis, Mexico is still most vulnerable, but with a smaller 1.6% of its GDP at risk, followed by Slovakia, Korea, Hungary, Japan, Canada and Germany.
A chart showing US car export data Photograph: Capital Economics
Capital Economics also suggest the tariffs could benfit the US auto sector, or they might simply hurt demand.
US vehicle sales totalled 16 million in 2024, of which about eight million were imported. The low level of US capacity utilisation in the vehicle sector suggests that there is scope for domestic production to rise to offset lower imports.
If capacity utilisation returned to its prior peaks, that would be consistent with a rise in vehicle assemblies of three million. That said, the big risk is that higher prices will cause consumers to reduce demand rather than switch to domestic suppliers, and there will be other constraints on production in the short term such as a lack of workers.
The yield, or interest rate, on UK government bonds has risen today as investors digest yesterday’s Spring Statement.
10-year gilt yields are up 6 basis points, or 0.06%, to 4.784%, towards the 16-year high over 4.92% set in January. Long-dated 30-year gilt yields are up too, at 4.362%.
Yields rise when bond price fall, and measure the government’s cost of borrowing.
US government bond yields are also up today, but European borrowing costs are lower.
The fiscal plans outlined yesterday showed borrowing would be higher than previously forecast over the next five years:
— Office for Budget Responsibility (@OBR_UK) March 27, 2025
Rising bond yields adds to the UK’s fiscal challenges, as it pushes up the cost of borrowing.
And if the UK’s economy performs worse than expected (perhaps due a trade war), tax receipts could be lower, meaning pressure to borrow more.
Yesterday, the UK’s Debt Management Office (DMO) outlined how it will issue £299bn of gilts this financial year, to cover maturing debt and new borrowing. That’s slightly lower than the £305bn forecast.
Evem so, analysts at Morgan Stanley have warned that “the path ahead looks fraught”, telling clients:
The headroom was restored, the gilt remit was kept just under £300 billion, and the share of longs [longer-dated gilts] was lower than even our below-consensus forecast.
And yet...the consolidation was back-loaded. Fiscal buffer is modest. Risks to growth are skewed to the downside. The path ahead looks fraught - although on current forecasts, it is a path of a meaningful fiscal consolidation.
Reynolds talk interrupted by pro-Palestinian protesters
A protester interrupts Business Secretary Jonathan Reynolds delivering his speech at Chatham House in London at the think tank’s global trade conference. Photograph: Stefan Rousseau/PA
Business and trade secretary Jonathan Reynolds has been interrupted by pro-Palestinian protesters calling for an end to the sale of F35 jet parts to Israel, PA Media report.
At the start of Mr Reynolds’ appearance at a conference on trade hosted by the think tank Chatham House, a demonstrated shouted:
“This man and his government are complicit in genocide.
“The F35s are massacring Palestinian children. They have not stopped the trade of F35s.”
After the protester was removed from the event, Mr Reynolds said:
“We have suspended arms exports to Israel.
“We have not suspended F35s because they are integral to our national security and the defence of Ukraine, and people will know the supply chain for the F35 means they cannot be isolated to one country.
“That decision was laid out very clearly in Parliament, so I’m quite happy if he wants to ask a question rather than jump on stage to have that engagement with him.”
He was then interrupted by another protester waving a Palestinian flag and calling for an end to F35 exports, who was subsequently removed.
