German Carmakers Predict U.K. Tariffs after Brexit

The U.K.’s decision to exit the European Union appears almost certain to result in tariffs for European carmakers on their British-made vehicles and components, Reuters reports.

Britain hopes to preserve its tariff-free status with the EU after so-called Brexit. But industry sources tell the news service that isn’t likely to happen. German Chancellor Angela Merkel opposes special treatment for the U.K. that could encourage other nations to quit the EU. VDA, Germany’s auto industry trade group, agrees, saying the top priority for EU members must be to “stand together.”

Ford Motor Co. has warned that engines it makes in the U.K. could be saddled with nearly 3% duties after Brexit is completed. Exports of British-made vehicles can be taxed as much as 10% under World Trade Organization rules.

Without trade concessions, EU-based exporters can expect their British-built goods to gain about £3.9 billion ($4.9 billion) in annual tariffs, according to U.K.-based Civitas (The Institute for the Study of Civil Society).

New taxes also would hurt auto plans in the U.K., which import about 60% of the parts—two-thirds of them from the EU, according to the Society of Motor Manufacturers and Traders.