UK in talks over US car tariffs, could look at EV incentives, Reeves says

(Corrects March 27 story to make clear Tesla benefits indirectly from credit scheme, does not receive UK subsidies, changing reference in headline, paragraphs 1, 3, and 11)

By Catarina Demony and Kate Holton

LONDON (Reuters) -Britain is working intensely with Washington to secure an exemption from U.S. auto tariffs and could review a credit scheme that indirectly benefits Elon Musk's Tesla to better support its industry, finance minister Rachel Reeves said on Thursday.

Reeves said Britain should be given a carve-out from any global tariffs because the two countries report trade surpluses with each other due to measurement differences, after U.S. President Donald Trump unveiled his latest move - a 25% tariff on imported vehicles.

Reeves also said the government could review an electric vehicle incentive scheme that has indirectly benefited Tesla, owned by Trump ally Musk. Canada recently froze rebate payments to Tesla.

Asked if Britain could save carmakers such as Jaguar Land Rover, Rolls Royce and Aston Martin from tariffs she said: "That's what we're working on. We've got a few more days left of those negotiations before these tariffs are due to come in."

New U.S. levies on cars and light trucks will take effect on April 3, the day after Trump plans to announce reciprocal tariffs aimed at the countries he blames for the bulk of the U.S. trade deficit.

Talking to British broadcasters a day after the government's fiscal watchdog warned that Trump's tariffs could derail the country's economic growth, Reeves said she did not want to do anything that would escalate a trade war.

"Trade wars are no good for anyone," she said. "We are working intensely these next few days to try and secure a good deal for Britain. I recognise how important this is."

Speaking separately in Paris, Prime Minister Keir Starmer told a press conference on Thursday that Britain would continue to keep all options on the table in relation to its response to the tariffs.

"The industry doesn't want a trade war but it's important that we keep all options on the table," Starmer said.

The U.S. is the second-biggest importer of British-made cars after the European Union, with nearly a 20% share, data from industry body SMMT shows.

Reeves, who has struggled to grow the economy since the Labour government was elected in July, also suggested that she could review a policy designed to encourage manufacturers to make more electric vehicles.

As a company that only sells electric vehicles, Tesla can sell surplus credits to those car companies which are struggling to meet EV sales targets set by the government.

"We are looking at the zero emission vehicle mandate which is why some of... that money goes to Tesla, and looking at how we can better support the car manufacturing industry in the UK," Reeves said.

London has also sought to agree a tech-led deal with Washington that it hopes will potentially spare it the direct hit of tariffs on its own exports.

(Additional reporting by Sam Tabahriti, Editing by Catherine Evans and Sharon Singleton)