3 April 2025: 25k motor industry jobs could be at risk

In his eagerly awaited speech last evening. The president announced that he had decided to place a 25% tariff on U.S. imports of all foreign-made vehicles and other goods imported from the UK; a 10% tariff would also be added.

It is difficult to see that the Prime Minister has any wiggle room to negotiate a lower charge since it could be argued that Britain has “got off light” compared to other nations.

Nevertheless, car manufacturers of all sizes will be horrified about the decision, which could see up to 25,000 jobs in the sector disappear.

Earlier in the day, Keir Starmer had told Parliament that the UK would act calmly and pragmatically in reacting to the imposition of tariffs and that every option would remain on the table. However, negotiations about a far-reaching trade agreement were ongoing.

The Chancellor appeared before a House of Commons select committee yesterday, and she acknowledged that the imposition of any tariffs on UK exports would be “unwelcome”.

Today will see the reaction from markets and economists, but there is no doubt that while Trump did not acknowledge the existence of the “special relationship”, it is true to say that the UK has fared better than almost any of America’s largest trading partners.

As the country awakes to news of the new measures, elsewhere, the credibility of UK economic data has been thrown into doubt after senior officials at the Office for Budget Responsibility (OBR) and the Bank of England raised serious concerns about the reliability of statistics produced by the Office for National Statistics (ONS).

Speaking to MPs on the Treasury select committee, Richard Hughes, chairman of the OBR, warned that “trying to get a clear read” on the UK economy from current ONS data is “very difficult”. His comments follow a sharp decline in response rates to the ONS’s labour force survey, which has compromised the quality of data on employment and wage trends.

The situation has now triggered a formal government investigation into the 'performance and culture' of the ONS. The review, commissioned by the Cabinet Office and the UK Statistics Authority, will be led by Sir Robert Devereux, a former top civil servant, and is expected to conclude this summer.

Andrew Bailey, the Bank’s Governor, has long believed that he and his colleagues on the Monetary Policy Committee are, on occasion, having to rely on anecdotal evidence when making policy decisions since they often feel that the data is simply inaccurate.

He has described the MPC’s task in setting rates using flawed data as a “substantial problem”.

The pound broke the 1.30 barrier as the dollar weakened following Trump’s speech. It rose to a high of 1.3070 before settling back to close at 1.3040 before the Asian opening.

There is concern that although inflation appears to have fallen last month, the annual round of price increases that have arrived with the start of the financial year will see consumers subjected to higher inflation going forward.

Energy bills, Council tax, mobile phone bills, broadband costs and tax increases will all see consumers have less money in their pockets, which will only be partially offset by interest rates that are lower than they were a year ago.

Surrounded by an invited audience of sycophants and supporters from both Houses of Congress, Donald Trump delivered his long-awaited speech late in the afternoon Washington time, telling the assembled multitude that he was being kind and benevolent to nations that had “ripped off” the U.S. for many years.

Ignoring the fact that he formed part of the large group of investors who decided to “export” U.S. manufacturing capability to Asian nations with significantly lower cost bases than the U.S, Trump said he did not blame such countries as China, Japan and India, as well as Mexico and Canada for taking advantage of the fact that previous Presidents had been “asleep at the wheel”.

Trump was in a self-congratulatory mood as he called upon a shop steward from the Auto Workers Union to come up to the dais and “sing the praises” of what he expects to the end of years of decline in his home state of Michigan, which is the centre of the U.S. auto industry.

Trump announced that the “worst offenders” will have to pay more to sell their goods in the U.S., and the only way around the imposition of tariffs would be to build factories to manufacture within the U.S.

As well as the 25% tariff on the import of all foreign manufactured vehicles into the country, the President also announced that anyone who borrows to fund the purchase of a U.S. built vehicle will be able to offset the interest on that loan against tax.

He described the measures as “reciprocal”, intending them as retaliation for years of imbalances created by other countries' policies. He also reinstated plans to end the tax-free treatment of small packages that will damage Amazon as well as Chinese manufacturers like Temu and Shein.

He went on to criticize both Australia and New Zealand, who export billions of dollars' worth of beef and lamb to the U.S. each year but will not accept U.S. meat imports.

China, facing a 34% tax, says it will "resolutely" hit back at the US and "take countermeasures to safeguard its rights and interests". "China urges the United States to immediately cancel its unilateral tariff measures and properly resolve differences with its trading partners through equal dialogue," said the commerce ministry.

Apart from the 25% tariff on imported vehicles and tariffs on individual nations that have taken advantage of the U.S. for years, Trump also announced a 10% blanket tariff on all U.S. imports of finished goods.

There is sure to be further action and reaction as the day goes on.

The dollar reacted poorly to the news, as analysts expressed concerns over the tariffs' short—to medium-term effects.

As Trump spoke of the growth of the country’s manufacturing base, it will take years for the factories to be refurbished and rebuilt. In the meantime, consumers will have to pay higher prices for goods that continue to be imported from abroad.

The Greenback weakened across the board, with the index falling to a low of 103.04. Any short-term weakness will not concern the President since he blamed China, among others, for currency manipulation.

The European Union was hit hard by President Trump’s imposition of tariffs on U.S. imports from the Union’s constituent states. From French Wine to Italian luxury goods and German vehicles, the entire region will suffer at the hands of the measures.

Trump bemoaned the fact that Europe imports a fraction of the goods that it exports to the U.S. and wants to redress the balance. He told his audience that the time had come to stop other nations from freeloading off the back of “American generosity.”

It is doubtful that Brussels, Berlin, Paris, or Rome will see the measures in the same terms, and Trump can expect some strong retaliation, although he feels in an almost invincible position while the EU’s stance is, he feels, indefensible.

A potential trade war following the announcement of new tariffs may require unconventional policies from central banks, European Central Bank policymaker Robert Holzmann said on Wednesday.

Holzmann, who said the hope was that policymakers would be better equipped to enforce the policies, added that Central Banks cannot be responsible for the whole economy apart from inflation and financial stability.

In an interview with Reuters, Holzmann welcomed data published on Tuesday that showed eurozone inflation, including in the closely watched services sector, easing last month. The data fuelled market bets on a sixth consecutive rate cut at the ECB's next meeting on April 16, which would take the rate it pays on bank deposits from 2.5% to 2.25%.

But Holzmann, who alone dissented to the ECB's latest rate cut in March, expressed caution, arguing the economy did not need to be stimulated.

"We had assumed inflation would come down," the Austrian Central Bank governor said. "As we are in neutral and inflation is converging to target, there is no reason to become accommodative."

As the region digests the measures announced by the U.S. President yesterday, there is certain to be a feeling that while the measures may be disinflationary for the EU, they could affect growth, particularly in the export sector, which has been struggling hard recently.

The Euro gained in the aftermath of Trump’s speech, in keeping with general dollar weakness. It climbed to a high of 1.0920, but the elusive 1.10 level still seems a long way off.

Have a great day!