Other News: Protecting Auto Supply Chains Amid Shifting Tariff Risks
As global supply chains face rising disruption from tariff changes, the automotive sector finds itself particularly exposed. US president Donald Trump has hit all foreign-made cars with a 25% tariff, including those imported from the UK, and a 10% tariff on most other UK goods.
Even though a US federal court has recently struck down much of this policy, the threat of tariffs remains severe. The court’s decision has been paused pending an appeal, and legislation could yet be passed to reinstate the measures.
With the UK heavily integrated into global supply networks, even minor shifts in US trade policy can ripple across domestic operations. Not only are assembled UK vehicles targeted, but also parts and components such as gearboxes, drive systems and electric vehicle (EV) battery modules.
The wider shockwaves for automotive
The knock-on effects are just as concerning for broader manufacturing, particularly as machine tools, electronics, plastics and metal-based inputs that support the UK’s industrial base are now costlier to sell into the US.
There is no carve-out for EVs, hybrids or premium cars, and their suppliers are all in the firing line. It is not just a price problem but a strategic challenge that affects competitiveness and investment.
Last month, UK car production fell by 8.6 per cent, marking the worst April output since 1952. Over the same period, exports to the US – one of the UK’s biggest markets for vehicles and components – declined by 2.7 per cent, with the Society of Motor Manufacturers and Traders attributing the drop to weaker demand and tariff-related uncertainty.
However, with the right customs knowledge and agile approach to supply chains, the damage to your business can be mitigated.
Mounting strain across global operations
The impact on supply chains is wide-reaching and already being felt, as companies move to fast-track shipments and rush to clear stock ahead of potential tariff hikes. That puts huge pressure on logistics, warehousing and shipping infrastructure, particularly for SMEs without deep supply chains or flexible storage capacity.
Not only would a 25 per cent tariff on cars put UK-made vehicles on a significantly less competitive footing in a global market, but – on the manufacturing side – the 10 per cent tariff on broader UK industrial goods could lead to US buyers reassessing their sourcing strategies, especially in high-volume categories like engine parts, suspension systems or electronics.
Disruption here isn’t theoretical; it’s real, immediate, and affecting planning today.
And with suppliers already operating on tight margins and being forced to absorb the costs, the choice is to pass these on to consumers or risk losing contracts. For SMEs this tariff regime could mean a real risk of being priced out.
Actions UK firms can take today
However, UK automotive manufacturers have several practical levers they can pull, and there are opportunities to improve supply chain resilience and wider business practices.
First, businesses should revisit their contract structures and Incoterms. Where contractually possible, manufacturers should explore passing on import duty responsibility to their supply chain partners or sharing the burden through dual agreements. For those with multi-tiered supply chains, the ‘First Sale Rule’ can be a game-changer for reducing duty.
Businesses can also explore duty relief mechanisms already available in the UK and US:
- Inward Processing Relief (IPR): For imported components that are re-exported, VAT and duty can be suspended on entry.
- Customs warehousing or Returned Goods Relief: Helps avoid unnecessary costs for goods temporarily held or re-exported.
- US Foreign Trade Zones (FTZs): Where goods are assembled into finished products, tariffs can be reduced or avoided altogether.
- Duty Drawback: Lets businesses reclaim US tariffs paid on re-exported goods. It takes effort and good recordkeeping, but can deliver significant savings.
Reclassifying goods based on how they are bundled, assembled or described could also shift products into a more favourable tariff category. Businesses should identify where UK origin is creating the tariff exposure and whether some value could be shifted to another country with better US access.
While these steps provide some immediate protection, businesses should also be looking outward – at new markets and trade agreements that could support long-term resilience.
Tapping into trade deals and diversification
The UK’s strengthening ties with key global partners present a real opportunity for exporters. Whether through new frameworks like the Atlantic Declaration with the US, progress on CPTPP, or bilateral agreements with fast-growing economies, trade deals are only as valuable as their uptake. Businesses need practical support to understand and use them.
Europe remains the UK’s largest and most strategically important trading partner. Continued collaboration with the EU – including efforts to simplify rules of origin, reduce red tape, and digitise customs processes – is vital for keeping goods moving and supporting SMEs. At the same time, growth markets across Asia, the Gulf, and Latin America offer real potential for UK goods and services, offering valuable hedges, especially for businesses already operating internationally.
The key is to align production, sourcing, and documentation now, so that UK businesses are able to pivot quickly and claim trade benefits without delay.
Support from the Chartered Institute
Navigating these risks doesn’t have to be done alone. The Chartered Institute of Export & International Trade works directly with automotive businesses across the UK to help reduce the duty burden and improve compliance.
We support companies to:
- Identify where tariffs can be avoided, reduced, or reclaimed – particularly via Free Trade Agreements or duty drawback schemes;
- Train staff in customs and supply chain optimisation, so tariff mitigation becomes a strength, not a reactive bottleneck;
- Stay ahead of regulatory shifts, with practical guidance, scenario planning, and bespoke advice from our trade experts.
Whether you’re rethinking supply chains or just want to check your current exposure, we’re here to help you act, not react. To explore the support available, contact us or visit our website.
