• By Faisal Islam
  • Business editor

1 hour ago

image source, Getty Images

Starting Monday, an additional duty or tax of 6% will be imposed on all cars exported by the United Kingdom to Canada.

The change comes after a post-Brexit agreement to maintain EU trading conditions expired without a new deal.

The new tariffs will be determined by whether British products exported to Canada use parts and materials from the EU.

Previously lifted restrictions now apply, meaning certain exports, including cars, will not be eligible for zero-tariff trade.

In 2023, 1.3% of cars built in Britain were exported to Canada, making it the UK's eighth largest market, according to the Society of Motor Manufacturers and Traders (SMMT), which represents the UK automotive industry.

The automotive industry has expressed concern, particularly as there appears to be no timetable for a resumption of talks.

The tariff is “disappointing”, SMMT's Mike Hawes said, adding that manufacturers “can only do so much” to mitigate the higher costs to consumers resulting from the tariff.

“Given the importance of Canada as a market for British automotive exports and the harm this tariff will have on Canadian consumers, we urge all parties to be pragmatic and restart negotiations on an improved trade agreement,” Mr. Hawes added.

These so-called rules of origin also play a role in the chemical industry.

There is a major disagreement between the UK and Canada over punitive tariffs on British cheese exports and the UK's refusal to allow imports of Canadian hormone-treated beef. Because of the disagreement, the trade minister halted negotiations on a broader free trade agreement with Canada.

Trade Minister Kemi Badenoch met her Canadian counterpart at a trade summit in February and officials recently continued talks without a breakthrough. A British government source said it was a shame Canada couldn't recognize that “now more than ever” it was vital for allies to work together.

“Regrettably, Canada has shown no willingness to agree to an extension,” they said. “You can only bang your head against a brick wall for so long if the other side isn't willing to find solutions.” Canadian farmers have lobbied the government in Ottawa to veto ratification of Britain's membership in the trans-Pacific trade agreement Insert CPTPP. But Canada appears to be pushing for the UK to join. However, with elections looming in both the UK and Canada, it could take some time for the dispute to be resolved.

A spokesperson for the Department of Business and Trade said: “Canada's decision not to extend these rules of origin will increase trade costs and harm businesses on both sides of the Atlantic.”

“The UK government remains willing to work with Canada to find a solution that works for both countries, but we will not accept any backtracking on current conditions.”

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