Trump throws UK automakers into turmoil once again

UK Automotive Industry Faces New Crisis Amid US Tariff Escalation

Britain's car manufacturing sector, which has already experienced its most challenging period in decades, is now facing renewed turmoil due to recent actions by Donald Trump. The industry has become entangled in the fallout from his controversial bid to acquire Greenland.

On Saturday, the US president revealed a fresh 10% tariff on imports from the UK and other European partners, with analysts warning that the automotive industry will bear the brunt of these measures.

For many in the sector who had hoped the global trade tensions were easing, this latest development is a significant setback.

Industry figures indicate that UK vehicle output in 2025 had already dropped to its lowest point since World War II, hampered by existing tariffs, sluggish domestic demand, and a major cyber incident that halted Jaguar Land Rover’s operations.

Now, with the introduction of these new tariffs, the situation could deteriorate even further.

The initial 10% duty is set to take effect on February 1, with the possibility of rising to 25% unless the UK and its European allies concede to Trump’s demands regarding the Danish territory.

This escalation poses a severe threat to the automotive sector, which stands as the UK’s largest export to the US—amounting to £10 billion in the year leading up to June. Pharmaceuticals, which are currently exempt, are the only major export not affected.

According to a senior industry insider, car manufacturers are closely monitoring diplomatic efforts to avert the tariffs, but there are concerns that US orders could be impacted immediately.

The Institute for Public Policy Research (IPPR) has warned that up to 25,000 jobs in the UK automotive industry could be at risk if exports to the US collapse. Pranesh Narayanan, an IPPR research fellow, notes that the wider supply chain could also suffer, potentially destabilizing the entire sector and threatening the government’s economic growth objectives.

Currently, UK car exports to the US are subject to a 10% tariff, but this could climb to 35% if Trump follows through with an additional 25% levy in June.

“If tariffs reach 35%, we could see a dramatic loss of market share that endangers the survival of major British automakers,” Narayanan explains. Matthew Lyons from the University of Birmingham adds that if the most severe tariffs are imposed, the UK could face economic losses in the billions, possibly tipping the country into recession. Andy Palmer, former Aston Martin CEO, warns that these tariffs would have a devastating impact on Jaguar Land Rover, the nation’s largest car producer.

These challenges come just months after Jaguar Land Rover suffered the costliest cyberattack in UK history, which brought its factories to a standstill. Palmer describes the situation as a “black swan event” for a company so dependent on the US market.

He also points out that this is an unprecedented scenario, as tariffs are being used for political leverage rather than trade imbalances. Palmer emphasizes the need for the UK and EU to work together in negotiations, stating, “This is about using trade as a bargaining chip, which is not the intended purpose of tariffs. Ultimately, it’s American consumers who will pay, all to pressure Europe over Denmark’s territory. It’s a strange situation.”

Palmer further argues that relocating production to the US to avoid tariffs is unrealistic, as building new plants would take at least two years. Shipping large volumes of vehicles to the US ahead of the tariff increase is also not a viable solution.

Industry Response and Outlook

“There’s no quick fix or alternative market for these vehicles,” Palmer notes. “Most companies will likely keep a low profile and try to weather the storm.”

While UK carmakers have previously managed the 10% tariff by sharing costs with suppliers and US partners to limit price hikes for American buyers, Palmer says absorbing another 10% increase is impossible. “With profit margins around 4%, automakers simply can’t absorb these tariffs. The costs will have to be passed on, which will reduce demand as higher prices put cars out of reach for some buyers.”

To minimize potential losses, Jaguar Land Rover may temporarily suspend exports to the US, as it did during the initial wave of tariffs. “They relied on existing US inventory while assessing the situation,” Palmer recalls. “If I were in their position, I’d consider doing the same for a few weeks.”

Both Jaguar Land Rover and Mini have yet to comment on the situation.