UK carmakers face major threat from Trump’s ‘Liberation Day’ tariffs on foreign cars, think tank warns

• With one in eight UK-built cars exported to the US, manufacturers face serious challenges
• EVs have the potential to offset these losses
• UK industrial strategy must prioritise ‘buying British, buying green’

The UK car manufacturing industry is bracing for a significant challenge as US President Donald Trump last night imposed a 25% tariff on car imports - 10% for British-made cars, referring to the event as "Liberation Day.".

With one in eight UK-built cars exported to the United States, the potential tariff could place extreme pressure on the sector, threatening thousands of jobs and economic stability, according to the Institute for Public Policy Research (IPPR).

The report estimates that over 25,000 direct jobs in car manufacturing could be at risk, particularly at Jaguar Land Rover and the Cowley Mini factory, which are heavily reliant on exports to the US, exacerbating existing pressures on the industry.

A green opportunity amid the crisis

Despite the threat, the think tank sees an opportunity for Britain to pivot towards green transport manufacturing, which includes electric vehicles (EVs).

With the global export value of internal combustion engine cars falling by 24% between 2018 and 2022, EV demand has surged by 740% in the same period. It reckons that the UK - already home to over 4,900 transport manufacturing firms employing 263,000 people -  is well-positioned to capitalise on this transition.

In 2024, more than 35% of all cars manufactured in the UK were electric or hybrid models, many of which were exported. The IPPR suggests that shifting focus to green transport manufacturing could not only compensate for lost exports to the US but also unlock domestic and international growth opportunities.

Strengthening the domestic market

It believes the UK’s reliance on car imports presents another opportunity for domestic manufacturers. Currently, car production in the UK is 2.5 times lower than car registrations, highlighting an untapped internal market with the IPPR arguing that by making it easier for consumers to "buy British and buy green," the government can drive economic growth, create jobs, and support climate goals.

To secure the future of the UK transport manufacturing sector, the IPPR is urging the government to include in its forthcoming industrial strategy measurs which boost domestic demand for EVs with purchase incentives and cut VAT on public charging points, as well as providing grants for lower-income buyers.

Pranesh Narayanan, research fellow at IPPR, stressed the urgency of government intervention: “Trump’s tariffs have huge potential to completely destabilise the UK car manufacturing industry, affecting tens of thousands of jobs and putting the government’s growth plans at jeopardy.

“However, as one door closes, another one opens. There is huge untapped potential in manufacturing green planes, trains, and automobiles and selling them at home and abroad. If the government uses the upcoming industrial strategy to drive investment in these sectors, this could be the spark that leads to thousands of new consumers starting to buy British and buy green.”