Donald Trump continues his ‘flood the zone’ strategy with his proposed 25% tariffs on imported (non-US-made) vehicles and trucks, ostensibly to create new jobs and attract new manufacturing and assembly plants to the USA.
While his proposed tariffs have sparked hope among union members for a revival of manufacturing jobs, the potential economic ripple effects cannot be ignored.
Trump’s gamble provokes mixed responses
This is a dangerous policy and one that the EU and the UK need to respond to strategically. Many United Auto Workers (UAW) union members will support Trump’s plans, even if they are eventually scuppered. The union has been critical of bad trade deals that have seen many skilled manufacturing jobs leave the US. Understandably, UAW president Shawn Fain welcomed Trump’s announcement, saying:
“We applaud the Trump administration for stepping up to end the free trade disaster that has devastated working-class communities for decades. Ending the race to the bottom in the auto industry starts with fixing our broken trade deals, and the Trump administration has made history with today’s actions. Ending the race to the bottom also means securing union rights for autoworkers everywhere with a strong National Labour Relations Board, a decent retirement with social security benefits protected, healthcare for all workers including through Medicare and Medicaid, and dignity on and off the job.”
Fain, who led the union through the fight for excellent new contracts with the Big Three US auto manufacturers (GM, Ford and Stellantis), and who is pumping money into a massive union organising campaign in non-union auto plants, has said:
“The UAW, and the working class in general, couldn’t care less about party politics; working people expect leaders to work together to deliver results. The UAW has been clear: we will work with any politician, regardless of party, who is willing to reverse decades of working-class people backsliding during the most profitable times in our nation’s history. These tariffs are a major step in the right direction for auto workers and blue-collar communities across the country, and it is now on the automakers, from the Big Three to Volkswagen and beyond, to bring back good union jobs to the US.”
However, what appears to be a victory for unions could come at a steep cost to American consumers and the automotive market.
Union support versus costs to consumers
The problem is that Trump’s tariffs on non-US-made vehicles (with tax breaks for loans to buy US-made autos) will cost US consumers dearly. Since Trump’s plan (as was later clarified) now includes tariffs on components coming into the USA – some of which, those notably from Mexico and Canada, cross borders multiple times – the cost of these tariffs will be passed on to consumers.
US car dealers especially of imported premium autos, including British-built cars, will be nervous – especially if showroom prices soar by more than $25,000.
However, the financial burden on US buyers is only part of the story; the global implications for major car-exporting nations such as the EU and UK are equally significant.
Global impact on vehicle exports
The impact on major vehicle exporters to the US (the EU, UK, Japan, South Korea, Mexico and Canada) was outlined in stark terms by David Bailey, Professor of Business Economics at the University of Birmingham and one of the leading experts on the global automotive industry:
“The EU and UK auto sector is already being squeezed by falling exports to China, stagnant demand in Europe and slow EV sales, with UK plants operating below capacity. The USA is the largest export market after the EU. Autos are the number one goods export to the USA, worth £8.3bn out of £60bn worth of exports to the USA.
“The main UK firms exporting to the US are ‘premium brands’: Jaguar Land Rover, Rolls Royce, Bentley, Aston Martin and Mini. This will have an impact on the West Midlands – the home of Aston Martin and Jaguar Land Rover – making the region the leading UK export region to the US. As Bailey says, “The West Midlands is also the centre for components that go into exported cars”.
Trump made it clear in his rambling announcement that his aim is to attract more overseas companies to build manufacturing and assembly plants in the US. German companies, including Mercedes Benz, BMW and Audi, could well be lured in, but will face problems at home if they are.
Challenges for the UAW and UK automotive industry
Beyond the economic challenges abroad, Trump’s tariffs reveal deeper issues within the US labour market, particularly for unions struggling to gain a foothold in foreign-owned plants.
The problem for the UAW is that it is almost impossible to organise and secure union recognition for foreign companies that are unionised at home (Germany and the Japanese transplants, for example) because the start-up plants are in the southern US, in right-to-work states, or in semi-rural areas where there are not many decent manufacturing jobs.
Regarding the situation in the UK, Bailey comments: “Here in the UK, auto firms are operating well below capacity, and in some cases may be pushed below ‘viability levels’. The government’s industrial strategy needs to spell out now how it will help the industry, including immediate short-term support to keep plants open.”
Beyond the economic challenges abroad, Trump’s tariffs point to deeper issues in the US labour market, particularly for unions that are struggling to gain a foothold in foreign-owned plants.
Retaliatory moves and future trade negotiations
In the EU, the temptation will be to hit back hard, notably at Tesla: as Tesla’s recent unsigned letter to the United States Trade Representative makes clear, retaliatory tariffs and component costs pose major threats to Elon Musk’s company.
There is also the question of how the EU and UK will react to China EV manufacturer Nio wanting to build an assembly plant for their cheaper, mid-range models – and how Keir Starmer will react.
Will he pin his hopes on a trade deal with the Trump administration? Government sources said there is “still all to play for” and Treasury minister Darren Jones says the UK has to take a “different approach” to other countries when it comes to negotiating tariffs with the US.
Yesterday evening Downing Street was privately briefing that a deal may be worked out before 2 April. Can Starmer use his charm to persuade Trump to think again? Or will he tell Chancellor Rachel Reeves to strike a deal with China? Whatever he does, he has no choice but to protect the UK’s ‘jewel In the crown’.
