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Exports would be impossible. The supply chains would be snarled up. And trade restrictions would destroy the economics of the industry. The UK has been lectured endlessly on how its departure from the European Union would destroy the British car industry. But hold on. It is now finding a new niche as an offshore manufacturing hub for the American market – and that is only possible because of Brexit.
On Tuesday, the Japanese auto giant Toyota announced a major new investment in the UK. It’s a plant in Derbyshire will start making GR Corollas, a popular high performance model in America. The reason is simple. Right now, Japanese cars shipped across the Pacific face a 25 percent tariff if they are sold in the United States. If the car was made anywhere in the EU it would face a 50 percent tariff from July, at least on the current policy. By contrast, under the terms of the UK’s trade deal with the US, the tariffs will only be 10 percent, at least up to the first 100,000 vehicles. It is a huge saving.
In reality, instead of closing down British industry, a combination of exiting the EU and the tariff wars has opened up a whole new range of opportunities. The UK can now be an offshore manufacturing hub for the American market. Toyota may be the first to spot it, but plenty of other multinational companies may soon jump on the bandwagon. Mercedes and BMW may soon figure out that a British assembly line is the easiest way around the tariffs. The pharma giants may decide the UK is a better bet than getting snarled up in tariffs imposed on Ireland, where they currently have factories. And the chemicals factories may decide the UK is now cheaper than France.
The list goes on and on. It has taken a while. But Trump’s tariffs are finally allowing British manufacturing to take advantage of Brexit. Of course it would help if the UK could start to properly exploit that. The nation’s energy costs, at 40 percent more than France, are still way too high; if they came down as well, the UK would be far more attractive. Further, cumbersome planning rules make it far too difficult to expand a factory even if you want to. And UK labor markets are no longer as flexible as they used to be, making it hard to fire people if President Trump changes his mind on tariffs, as he might at any moment. For now however it will give British manufacturing a much needed boost – and it is only possible outside the EU.
