-1-1.png?height=120&name=Curation%20Logo%20Transparent%20(1)-1-1.png)
Toyota has announced plans to produce battery electric vehicles in the UK while maintaining all eight of its European factories, a move shaped by escalating global trade tensions. Toyota, a hybrid technology pioneer, has been slower to transition to fully electric vehicles than its competitors. However, the UK government’s relaxation of its Zero-Emission Vehicle (ZEV) mandate has allowed Toyota to take a measured approach. The company aims to sustain European sales at 1.2 million vehicles annually, holding a 7% market share. (The Guardian)
Why does this matter? Toyota's decision aligns with a broader global trend as countries shift towards protectionist trade policies. A slew of tariffs imposed by President Trump has triggered a global trade war. To avoid tariffs, many car manufacturers aim to minimise cross-border trade by keeping or expanding local production. Indeed, Toyota’s European chief, Matt Harrison, noted that tariffs and trade barriers are shaping its strategy, with the company facing “encouragement to localise supply chains." This marks a significant departure from the globalised economy that has flourished since the 1950s.
Under Biden, the US-China trade war steadily intensified through tit-for-tat tariffs. However, Donald Trump has dramatically escalated trade tensions globally by enforcing a 25% tariff on steel and aluminium imports to the US, coming into effect on 12 March. While many countries were exempt from 2018 levies—including the EU, UK, and Canada—Trump has vowed these measures will be "without exceptions or exemptions."
In addition, more steel and aluminium products will be affected. In 2020, during Trump’s first term, tariffs were expanded to include derivative products such as steel nails, car body panels, and bumper stampings, as well as aluminium wires and similar components. While the full list for the 12 March levies has not yet been released, the White House has pledged a "significant" increase in covered derivative products.
In response, the EU has placed import taxes on around $28 billion worth of goods, including steel, aluminium, textiles, appliances, and agricultural products. Those tariffs are scheduled to start in April. Meanwhile, the Canadian government has targeted $20bn of US goods and has stated this will grow to $125bn should the US continue to escalate the trade war.
Trump’s trade policies have unsettled car manufacturers, forcing them to rethink supply chains and production strategies. On 4 March, Trump announced a one-month pause on a planned 25% tariff on car imports from Canada and Mexico. This tariff would be highly disruptive—the US, Mexico, and Canada produced 16.2 million vehicles in 2023, with highly interdependent supply chains. US manufacturers have warned the tariffs will hurt domestic production due to insufficient metal supply. Meanwhile, many German carmakers have shifted production to the US, while Toyota is considering exporting from the UK to the US if it avoids EU-related tariffs.
Toyota, the world’s largest car manufacturer by sales, has a strong presence in the US and recently committed to a $13.9 billion battery plant in North Carolina. In the UK, the Corolla plant in Burnaston, Derby, is now set to become one of the main factories for EV production. This decision comes after Toyota, among other companies, successfully lobbied the UK government to relax its Zero-Emission Vehicle (ZEV) mandate. Originally set to ban all non-electric car sales by 2030, the law has now eased restrictions on hybrids and extended the deadline to 2035.