New 10% import tariff applying to cars raises big questions for UK’s auto industry

Following the news that the UK Government is preparing a new 10% tariff for car imports, including those from the EU, in 2021;

David Leggett, Automotive Analyst at GlobalData, a leading data and analytics company, offers his view:

“With the UK automotive sector facing a long recovery from the COVID-19 crisis that has decimated sales this year, new tariffs on UK-EU car trade would be an additional and unwanted concern. The hope will be that tariffs can yet be avoided in a UK-EU agreement.

“This announcement from London suggests that the UK Government is serious about no extension to the ‘business as usual’ transition period on UK-EU trade beyond the end of this year.

“The UK’s auto industry is highly integrated with that of the EU, in terms of both manufacturing supply chains and a high proportion of car exports being bound for the EU. Over half of the 1 million cars exported from Britain last year went to EU27 markets.

“If those EU-bound vehicles have a reciprocal 10% import tariff levied by the EU under WTO trading rules, that potentially makes UK manufacturing much less attractive to car companies that have alternative options to produce at plants inside the EU’s tariff free customs union.

“Additional border checks would also be a concern for an industry heavily reliant on just-in-time logistics and with razor-slim margins.

“In the UK, a 10% import tariff would potentially also create problems for the retail sector either in absorbing higher prices or passing them on to consumers.”

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