TRUMP TARIFFS COULD HAVE DIRECT IMPACT ON UK FLEET MARKET

Plans mooted by US president-elect Donald Trump to impose huge tariffs on imported vehicles could directly impact the UK fleet market.

During his election campaign, he variously promised that tariffs of 100% or 200% would be imposed on all vehicles imported into the US, as well as 60% on all Chinese goods, which would directly affect electric vehicles (EVs) made in China.

Paul Hollick, AFP chair, said that, if implemented, any of these moves could dramatically affect the global car and van market, especially for EVs.

“There seems to be some confusion about whether these tariffs are actual plans by the Trump administration or some gambit to negotiate more advantageous trade deals. However, tariffs at this kind of level would effectively make imported cars unsaleable in the US, and, of course, there have also been sometimes substantial tariffs recently imposed in the EU.

Long-term effects

“All of that production aimed at the US – especially large numbers of Chinese EVs – will inevitably make its way towards freer global markets, the UK being one. So far, the actions of new Chinese entrants have been quite measured, but there will be a considerable temptation to dump large numbers of cars and vans here at low prices, causing high levels of disruption.

“Quite what the effect of all of this might be is difficult to say. At the extremes, our government might decide that domestic manufacturers need similar protection and introduce tariffs of its own, step back and let the market find its level, or any of a hundred points in between. The future view looks quite murky.”

He explained that UK fleets would be left in a difficult position, with a domestic market that was tricky to read and vehicle buying decisions that could be hugely risky.

“On one hand, having access to a supply of cheap Chinese EVs would arguably be good for fleets in their transition to net zero, and also provide a boost to the retail EV market. However, this is likely to come at the risk of stability, and a volatile market is ultimately a bad one where, for example, forecasting accurate residual values becomes very difficult.”

Watch out for the next few weeks

Paul added that Fleets would watch Trump’s statements carefully over the next few weeks.

“The sooner there is some clarity around the situation, the better. It is not a political point to say that what the president-elect says and what he does are pretty often two different things, but it seems likely that, given the extent to which he has spoken about tariffs during his campaign, this is not an issue that is going to go away.

“The truth is that tariffs imposed by a major Western economy of the scale being promised are almost unknown in modern times, and it is difficult, if not impossible, to forecast the impact. However, it’s also true that some economists are making quite dire predictions. We await the outcome with some trepidation.”

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