The suspension of trade negotiations with Canada could mean tariffs being slapped on cars exported there by the UK, the SMMT has warned.
Trade talks between the countries collapsed yesterday over disagreements on beef and cheese.
The Canadians had been pushing the government for a relaxation of the ban on hormone-treated beef. But the decision to walk away from the free trade talks could leave British trading terms with Canada worse off.
The two nations have been negotiating for the past two years after Brexit, with trade largely continuing under the same deal originally brokered when the UK was a member of the bloc.
Carmakers in the UK will be able to export to Canada vehicles that have EU-made parts tariff-free until April.
A time-limited side agreement had been in place protecting cheese and cars from higher tariffs, but protections for the former expired at the end of December, leaving British producers facing higher duties of 245%.
British car firms could see higher tariffs from April on exports, when an agreement is due to expire.
Canada was the UK automotive industry’s eighth biggest global market last year, it was revealed yesterday when 2023’s car production figures were announced.
SMMT CEO Mike Hawes was quoted by the PA news agency today as saying: ‘If UK car exports can’t use EU parts and components to avoid additional duties, it creates a risk that tariffs, potentially charged on top of luxury goods taxes, could be reintroduced.
‘This would benefit no one, not least Canadian consumers, and we urge all parties to get back around the negotiating table.’
Reuters reported him as saying: ‘Canada is an important market for UK car exports and, given the close ties between our two countries, the suspension of trade talks is especially disappointing and sends a signal that the UK’s world-class automotive products are not welcome in Canada.’
Downing Street said today that the government was open to restarting talks but only if terms were favourable.
Meanwhile, the British Chambers of Commerce said the suspension of talks was ‘unwelcome news’.
William Bain, its trade policy head, said: ‘For our dairy exporters and parts of our manufacturing industry, the loss of key trade preferences puts them in a worse position than before 2020.
‘Government must help these sectors through difficult times and open up new markets for our goods and services.’