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Will New Tariffs Trump the Motor Trade?

United States President Donald Trump seems intent on conducting a Trade War across the Globe, he has in his sights those Nations who he sees as dealing unfairly with the US including China, Mexico and the EU. In his determination to level the playing field back home even Mr Trumps friends and allies may get caught up in his drive to ‘Make America Great Again’.

The imposition of tariffs will no doubt be a cause for concern, but it is not easy to see how this will play out in reality as all leading brands are global with manufacturing far from their ‘home’ nation making political pressures and possibly tariffs less effective. It is worth mentioning that some UK manufacturers and our European neighbours outsource manufacturing from Turkey to Mexico, Brazil and beyond, taking advantage of friendly low tax economies and labour regimes and zero tariffs.

Mr Trump wants to bring production home, already the US manufacturing sector and the economy in general are creating jobs, investment within the US and profits. However, using tariffs as a political bargaining tool can backfire by hurting friendly economies coincidentally. Ford in the US have abandoned bringing the Focus Active production to the States because the production levels will not be sufficient, currently they are built in China, you have to wonder if the whole tariff question is posturing for the home political audience? After all elections are about to be run in the US.

Of greater concern just now is the effect of the Brexit negotiations frightening the pants off the financial markets and the pound sterling looking vulnerable. There is a possibility of a No Deal Brexit. Should the pound then go into free-fall that would have a serious impact on manufacturers who would have to pay more for their imported cars, components and other goods. However, if a trade deal is agreed post Brexit with the US the imposition of tariffs may not be a problem for the UK.