Trump's Trade Standoff Plunges UK Carmakers Back into Crisis

Less than a year ago, Sir Keir Starmer claimed to have delivered on his promise to protect jobs at Jaguar Land Rover. By striking a trade deal with the US in May, the Prime Minister said he had delivered the stability the carmakers desperately needed, and insisted he would back them “to the hilt”. However, seven months on, Britain’s manufacturers may not be feeling so supported after being plunged back into crisis by Donald Trump, caught up in the crossfire of his attempts to seize Greenland. The US president announced a new 10pc tariff on goods sent to the US from Britain and other European allies on Saturday, with experts warning the automotive sector will be hit the hardest. For manufacturers hoping that Trump’s global trade war was over after one of the sector’s toughest ever years, it is a killer blow. Britain’s vehicle production had already sunk to its lowest level in 75 years in 2025, according to industry estimates, hobbled by existing trade levies, weak UK sales and the cyber attack that shut down production at Jaguar Land Rover (JLR). However, worse could still be to come after Trump’s latest round of tariffs. The 10pc levy will initially come into force on Feb 1 before rising to 25pc unless the UK and other European allies allow him to take control of the Danish territory. This threatens to wreak havoc for the car sector, which is the UK’s biggest export to the US, totalling £10bn in the 12 months to June last year. That is apart from pharmaceuticals, which are currently exempt from tariffs. One senior industry source says carmakers are waiting anxiously to see how diplomatic efforts to head off the tariffs play out, although they warn that the effect on US orders could be immediate. The Institute for Public Policy Research (IPPR) said the 25,000 jobs across the UK’s automotive sector could be at risk from a collapse in exports to the US if Trump doesn’t back down. Pranesh Narayanan, a research fellow at IPPR, also says many more could be affected across the broader supply chain, “completely destabilising the UK car manufacturing industry and putting the Government’s growth plans in jeopardy”. Carmakers currently face tariffs of 10pc on exports to the US, although this could rise to 35pc following Trump’s threat of an additional 25pc levy come June. Narayanan adds: “With tariffs that could go up to 35pc, we are once again looking at a potentially massive drop in market share that threatens the viability of the big British manufacturers.” Matthew Lyons of the University of Birmingham said that if Trump fails to back away from his most aggressive tariffs, Britain will face a multibillion-pound hit that could push the economy into recession. Andy Palmer, the former chief executive of Aston Martin, warns that the full weight of the taxes threatened by Trump would inevitably have a huge effect on JLR, Britain’s biggest carmaker. That is just months after the business was targeted by the most expensive cyber attack in Britain’s history, which shut down its production for months. He says: “For someone like JLR, which is highly reliant on the US market, it’s an absolute black swan.” Palmer says the UK car industry has never before faced a situation where tariffs are being proposed for reasons not all linked to the balance of trade, and that Britain and EU states “will need to negotiate on this one collaboratively”. He says: “This is about weaponising international trade as a negotiating tool, which is not the purpose of a tariff. The American customer will be paying tariffs to push Europe to support the transition of power from Denmark. It’s really bizarre if you think about it in those terms.” Palmer also claims that shifting production to the US to escape tariffs would be impractical, with new factories taking at least two years to build. Nor will it be feasible for companies to send large numbers of cars across the Atlantic now to beat the levies coming into force next month. “There isn’t a magic formula or countermeasure, no alternative market where you could send cars to,” he says. “So I think most companies will basically try to keep their heads down, see where all of this goes and try to ride it out.” However, while UK carmakers have sought to cope with the existing 10pc tariff by sharing the hit with suppliers and US importers to minimise the cost increase for American consumers, he said that would not be possible for another 10pc hit. He says: “There’s no way that car companies, which are making 4pc profitability, can absorb this kind of tariff. You can’t play that softly, softly game. “So you are essentially passing on the cost to the consumer, and when you put the price up there are people who simply can’t afford it and the volume will come down.” To stave off steep losses, JLR may opt to halt exports to the US while the latest tariff threat plays out, as it did when faced with Trump’s initial levies last year. “They took the time to find out what was going on and relied on stock that they already had in the US,” says Palmer. “The last thing you want to do is ship a car halfway across the Atlantic and find that the tax regime has changed. “I would think about doing that again now if I were in their shoes, for a few weeks at least.” JLR and Mini did not immediately respond to requests for comment.