Panic as Starmer urged to use Trump's 90-day tariff pause to save car industry

A financial expert has urged Governments across the world to take action in the coming weeks to reduce the impact that President Trump's tariffs would have on the global automotive industry. As the Trump Administration suspends tariff increases for 90 days, many car manufacturers are still raising concerns about how the 25 % tariff on all new vehicles imported to America will affect the cost of their models.

Madhuchhanda Palit, an Automotive Analyst at GlobalData, highlighted that the tariff's impact has created particular concerns in Japan, where 30 % of models made in the country are exported to the US.

She explained: "The economic repercussions of these tariffs are particularly pronounced for Japan, where the automotive industry is a vital economic pillar.

"According to the Japan Automobile Manufacturers Association (JAMA), over 30 % of Japanese car exports were directed to the US in 2023, solidifying its status as the largest single-country export market."

Whilst increasing tensions between America and China have decreased the likelihood of Chinese car brands entering the USA, the 25 % tariff is likely to significantly impact well-established companies, particularly those from Japan.

According to data from the Japanese Ministry of Finance, exports to the US account for approximately six trillion yen (more than £30 billion). If the tariff causes brands like Toyota, Honda, and Nissan to increase prices, American car buyers would likely be more inclined to choose locally built alternatives.

So far, car companies have been cautious about raising the cost of their models due to the tariffs; however, Ford has warned that price hikes on the models they sell in America could be inevitable once their current inventory of vehicles is sold.

Madhuchhanda noted that the concern over whether to raise prices or reduce profit margins to compensate for the tariffs is also currently being assessed by many European car companies.

She continued: "The situation poses a significant challenge for European manufacturers, as increased tariffs could lead to higher vehicle prices in the US market, potentially driving customers toward competitors.

"Moreover, the dilemma these manufacturers face—whether to absorb costs or raise prices—could have lasting implications for brand loyalty and market share. The German automotive industry, which makes up nearly 65 % of the EU’s automotive exports, is acutely aware of the risks."

In a bid to protect the car industry, Madhuchhanda urged Governments, including America, to negotiate for better deals, which could be a vital lifeline for smaller brands who are unable to adapt their prices or create factories in the USA.

She added: "The US President's decision to suspend tariff increases for 90 days while negotiations unfold presents a critical opportunity for all stakeholders involved. Larger manufacturers may adapt through strategic pricing and production shifts, but smaller suppliers may face a more precarious future amid these changes.

"As the automotive sector increasingly focuses on domestic production to mitigate tariff impacts, the evolving landscape presents both immediate challenges and potential long-term opportunities for growth and investment."