Dr Matt Lyons and Dr Huanjia Ma investigate the impact that Trump’s tariffs will have on the UK’s automotive industry.
The US has proposed tariffs of 25% on car imports.
This blog aims to answer the following questions: What will this cost the UK, and where will it hit hardest?
TLDR: The proposed tariffs are estimated to cost the UK £9.8 billion in GDP between 2025 and 2030, putting 137,000 jobs at risk. The West Midlands will be hit hardest, losing £6.2 billion in GDP, 62% of the total impact on the UK.
Context
In 2024, the UK exported £8.3 billion worth of cars to the United States.
Table 1 shows the regional pattern of trade based on 2023 data. It shows that the West Midlands is by far the most exposed region with £3.3 billion of auto exports to the United States, representing 51% of all auto exports.
The West Midlands is home to Jaguar Land Rover, Aston Martin, Changan automotive and a large cluster of suppliers. In a 2023 study, 22 of the 50 largest automotive firms in the region were already found to be at risk of insolvency due to poor liquidity ratios.
Table 1. Automotive exports and imports to the United States by ITL-1 region in 2023
| £ millions | ||
| Exports | Imports | |
| West Midlands | 3300 | 81.3 |
| North West | 1200 | 28.2 |
| South East | 828.4 | 476.2 |
| East of England | 358.6 | 36.6 |
| East Midlands | 192.9 | 28.2 |
| London | 127.8 | 99.7 |
| North East | 104.9 | 8 |
| Scotland | 85.1 | 12.4 |
| Yorkshire and The Humber | 77.6 | 14.9 |
| Wales | 36.6 | 8 |
| South West | 31.1 | 17 |
| Northern Ireland | 16.4 | 40.6 |
| United Kingdom | 6359.4 | 851.1 |
Source: NISRA
Estimating the economic impact
The proposed tariffs will make automotive products from the UK (and all other affected countries) more expensive to US consumers and, therefore, negatively impact demand. The extent to which this will affect demand is dependent on two things:
- How much of the import costs are passed on to consumers
- The price elasticity of demand (how sensitive demand is to price changes)
For this analysis, we assume:
- All the cost of the 25% is passed on to consumers
- A price elasticity of -1.5*. i.e. 1% increase in price leads to a -1.5% fall in demand.
*Figures for price elasticity of demand vary considerably by product type but -1.5 seems within reasonable estimates.
So, we arrive at a formula:
1.5 x 25% = 37.5%
Price elasticity of demand x % change in price = % change in demand
If we assume £8.3 billion in auto exports to the United States in 2024, this new annual figure would be £5.2 billion, a fall of £3.1 billion.
The SEIM-UK economic model
To estimate the regional and economy-wide impacts of the fall in automotive export, we use the SEIM-UK. The SEIM captures the direct and indirect supply-chain impacts of a change in demand.
One of the variables in the SEIM is exports – using the estimates above -£3.1 billion, and the regional distribution (Table 1) we introduce this to the model. The loss of exports is assumed to occur entirely within the automobile manufacturing sector.
Table 2 presents the resulting losses in value added, employment, and GDP for the period 2025 to 2030. The total economic impact on the UK is estimated to be -£9.8 billion in lost GDP, -£9.9 billion in GVA and -137,000 FTE jobs.
The West Midlands is projected to suffer the most severe impact, with an estimated -£6.2 billion decline in GDP (62% of the total impact) and -£4.6 billion loss in gross value added (GVA). The North West is anticipated to lose -£2.1 billion in GDP and -£1.8 billion in GVA (21%) of the total. Together, these two regions will see 85% of the economic impact.
Table 2: The economic impact of a 25% tariff on UK automotive exports to the United States from 2025 to 2030
| Region | GDP （£m) | GVA （£m) | Employment (FTE) |
| West Midlands | -6200 | -4700 | -66,000 |
| North West | -2100 | -1800 | -25,000 |
| London | -100 | -900 | -9,000 |
| South East | -400 | -700 | -9,000 |
| East of England | -300 | -500 | -7,000 |
| East Midlands | -300 | -400 | -6,000 |
| Scotland | -100 | -200 | -3,000 |
| South West | 0 | -200 | -3,000 |
| Yorkshire and the Humber | -100 | -200 | -3,000 |
| North East | -100 | -200 | -2,000 |
| Wales | 0 | -100 | -2,000 |
| Northern Ireland | 0 | -100 | -1,000 |
| United Kingdom | -9800 | -9900 | -137,000 |
Figures rounded to nearest 1000
Source: SEIM-UK
The maps in Figure 1 reiterate the findings – the shock on GDP is particularly concentrated in the regions with automotive manufacturing and supply chains, but the employment impacts also affect the South East of England. This reflects the strong flow of incomes towards the South East.
Figure 1. The below shows the distribution of the impact on employment and GDP
| Employment | GDP |
 |
 |
Concluding remarks
The tariffs, if imposed, will severely damage the UK’s automotive industry, an industry already at risk from other global challenges, including peak car and electrification.
The impact will hit the West Midlands very hard, but not exclusively.
The methodology employed here has limitations—the price elasticity could overstate the negative impact, and the sector may find other markets. However, the story is unlikely to change.
Media coverage of the research
This is Money: Trump’s 25% tariffs on US car imports could threaten 25,000 UK jobs, think tank warns
The Guardian Business Blog: West Midlands to suffer most from new car tariffs – research
The Observer: ‘It would affect the area massively’: fear in Solihull as home of Jaguar plant awaits impact of Trump tariffs
This blog was written by Matt Lyons and Huanjia Ma, Research Fellows, City-REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WM REDI or the University of Birmingham.