LONDON – The U.S./U.K. trade agreement recently announced might have eased nerves in the British auto industry, but it has left American manufacturers unhappy and is more about undoing some Trump Admin. protectionism than a classic free trade deal.  

Dubbed the Economic Prosperity Deal, the pact commits Washington to reduce tariffs on imports of U.K.-made cars into the U.S. from the 27.5% rate announced by the Trump Admin. 45 days earlier, to 10% for the first 100,000 U.K. car imports into the U.S. annually, rising to 27.5% beyond that quota. The 27.5% includes the U.S.’s historic 2.5% rate and the universal 25% auto tariff announced by President Trump on March 26.  

An “accompanying arrangement for attendant auto parts for such autos (included in the agreement)” will also apply, according to the text of the agreement, which is not yet a formal deal. 

The tariff changes will not take effect until the agreement is negotiated into binding legal text, to which end the U.K. government said negotiations were beginning “immediately.”

Trade lawyers say it is difficult to estimate how long negotiations will take. A U.K. government spokesperson declines to comment on the timeline, saying only that the government “remains committed to building on the agreement.” 

William Bain, head of trade policy at British Chambers of Commerce, tells Wards the agreement still leaves U.K. automotive exporters in a worse position than they were before new U.S. tariffs came into effect on April 2: “Prior to April, duties on U.K. car and car part imports into the U.S. stood at 2.5%,” notes Bain. 

He does, however, think the negotiation period leaves room to bring more automotive products into the deal’s scope – for example, the definition of “attendant” automotive parts needs to cover “as many of the products previously subject to the lower duties of 2.5% as possible,” he says. 

Mike Hawes, chief executive of the U.K. Society of Motor Manufacturers and Traders (SMMT), is nonetheless relieved: “The agreement…to reduce tariffs on U.K. car exports into the U.S. is great news for the industry and consumers. The application of these tariffs was a severe and immediate threat to U.K. automotive exporters so this deal will provide much-needed relief, allowing both the industry, and those that work in it, to approach the future more positively,” he says.

However, American manufacturers are less enthused, unhappy that a trade deal was struck with a country with whom the U.S. industry has far weaker links than with Canada or Mexico. 

President Matt Blunt of the American Automotive Policy Council says: “The U.S. automotive industry is highly integrated with Canada and Mexico; the same is not true for the U.S. and U.K. We are disappointed that the administration prioritized the U.K. ahead of our North American partners.” He notes that under this deal, it will now be cheaper to import a U.K. vehicle with very little U.S. content than a vehicle from Mexico or Canada that is half American parts and so compliant with the USMCA (US-Mexico-Canada Agreement).

“This hurts American automakers, suppliers and auto workers. We hope this preferential access for U.K. vehicles over North American ones does not set a precedent for future negotiations with Asian and European competitors,” says Blunt. 

Bain stresses that the April 29 declaration by the Trump Admin. helping U.S. auto producers source parts overseas with tariff rebates will help these American manufacturers: “The U.S. government will be putting in place for U.S. car manufacturers a rebate scheme for car parts used in their supply chains in the next month,” he says. However, “that may not catch all car part imports from the U.K., under all possible international commercial terms, so there are ongoing issues to discuss with the U.S. government,” adds Bain. 

Some U.K. car manufacturers including Coventry-headquartered JLR (Jaguar Land Rover), which produces car brands popular with wealthy U.S. buyers including Range Rovers and Defenders and which exported roughly a quarter of its global sales volume to the U.S. in the 2024 financial year (ending March 2024), according to its latest annual report – have welcomed the deal. 

But trade law expert Totis Kotsonis of London-headquartered law firm Pinsent Masons has blogged that uncertainty and precariousness surrounding the agreement is unhelpful.  

“The (EPD) document makes it clear that either side may terminate ‘this arrangement’ by giving written notice to the other,” Totis writes, meaning the deal could crash before formal implementation, even if “it would be politically and strategically difficult for both sides to walk away from negotiations empty-handed.” 

SMMT data stresses the U.S. is Britain’s second-largest car export market after the European Union (EU), “with more than 101,000 units shipped in 2024, representing 16.9% of cars exported,” an SMMT spokesperson tells Wards. This was 17.9% in Q1 2025, SMMT data shows, likely due to exporters shipping rapidly to beat the introduction of tariffs. 

U.K. passenger car exports to the U.S. were worth £7.6 billion ($10.1 billion) in 2024, comprising mainly premium and luxury cars, the SMMT  says. 

Owen Edwards, head of automotive at London-headquartered accountancy firm Grant Thornton UK, says the quota on automotive exports at lower-rated tariffs is “something (U.K. auto) manufacturers will have to keep in mind when seeking to expand their export strategies.” 

On the flip side, while SMMT data indicate U.S. passenger-car imports to the U.K. only reached 18,000 units in 2024, out of 1.953 million new U.K. car registrations that year, some experts think the trade deal could increase American competition in certain segments, although the U.K.’s 10% tariffs on U.S.-made autos are not mentioned in the initial agreement. 

“U.S. manufacturers often specialize in larger vehicles, sports utility vehicles and pickup trucks, as well as certain luxury and performance brands. Increased imports in these segments might directly compete with U.K. manufacturers producing similar vehicles or fill niches that domestic producers do not currently cater to significantly,” Samir Alamad, senior finance lecturer with auto-sector expertise at Coventry University’s School of Economics, Finance & Accounting, tells Wards. 

The European Commission, the EU’s executive branch, is tracking the U.S. deal with its neighbor, given negotiations continue on potentially forging a EU/U.S. trade deal. “We are closely analyzing the trade agreement announced between the United States and the United Kingdom,” Commission trade spokesperson Olof Gill tells Wards, assessing “its content and potential implications carefully” and impact on EU interests.

Gill says the EU wants a more conventional trade deal, being “committed to fair, rules-based trade, including in the context of the WTO (World Trade Organization).”

Gill adds he wants an EU/U.S. trade deal to “remove barriers on both sides and deliver real benefits for industries on both sides of the Atlantic.” 

– with Sara Lewis in Brussels and Keith Nuthall in Ottawa