Downing Street has left open the option of imposing tariffs on Chinese-made electric vehicles as part of the Made in Europe package. Downing Street said on Friday that the government would welcome UK inclusion in the Industrial Accelerator Act after France dropped opposition to Britain joining the scheme. The rules aim to curb subsidised Chinese imports by giving EU-made products preferential treatment. The UK and Norway are worried that exclusion would put those countries at a disadvantage. The UK government fears that exclusion from EU supply chains could cost billions of pounds of car industry trade.
A Franco-German proposal on Thursday night would require the UK to align with the EU's tariffs on Chinese EVs, imposed in 2024. The proposal would allow European partners that belonged to the EU single market on January 1, 2020, including the UK and Norway, to opt in. Those countries would have to accept dynamic alignment with EU conditions on third-country investments and relevant EU trade defence measures.
A No 10 spokesperson said speculation about accepting tariffs as a condition of joining was premature because a European process remained under way. The spokesperson said the UK has an independent trade policy and keeps all tariffs under review. The spokesperson said the government works closely with the British automotive sector to ensure that trade policy reflects the sector's best interests. Business Secretary Jonathan Reynolds said this week that Reynolds would not be coerced into aligning with EU policy.
The Chinese embassy in London said the embassy firmly opposed any discriminatory practice involving tariff increases or restrictive measures on Chinese products. The embassy said the embassy had expressed serious concern to the UK about the reported proposals. The embassy said trade protectionism runs counter to World Trade Organization rules and market principles.
Chinese EVs are increasingly popular, with BYD sales rising 78% year on year in September. Chery sales rose 660%. Changan recorded an increase of more than 3,000% in market share.
EU lawmakers are expected to finalise the Industrial Accelerator Act, also known as Made in Europe legislation, by the end of the year or early 2027. Members of the European Parliament have already tabled 5,100 amendments, including one embracing the UK and giving Andy Burnham time to secure the deal Burnham wants. Mercedes-Benz boss Ola Källenius, also president of European car trade body ACEA, warned earlier this week that excluding the UK would deliberately hurt the car industry across the EU.
Tariffs could help UK-based manufacturers by preventing large volumes of cut-price Chinese models from entering the market. However, tariffs could raise consumer prices and harm British manufacturers selling vehicles to China if a trade war escalates. About 80% of UK-made cars are exported. More than half of those exports go to the EU, while 6% go to China.
Trade Minister Anas Sarwar hinted earlier on Thursday that the UK was inclined to align on tariffs. Sarwar said the UK and EU must work together and act in coordination to tackle China's dominance in the automotive sector. A car industry source said recent EU dialogue with China showed that safeguards could be secured without retaliation. China opposes expanding EV tariffs and has recently threatened a trade war over the European Commission's latest plan for quotas on Chinese hybrid cars, according to Commission officials.
World Trade Organization rules allow quotas to be introduced within months. Tariffs on Chinese cars could take more than a year, starting with notification of an investigation and followed by evidence-gathering and sharing over alleged harm to Britain's car industry.
Liam Byrne, the Labour chair of the parliamentary business committee, said tariffs on Chinese EVs would be a small price to pay to save the UK and EU car industries. Byrne told a London conference on Thursday night that the UK urgently needs a new China strategy to ensure British and European manufacturing survives. Byrne has been leading an investigation into the UK's position on China. Byrne criticised the government's approach as naive and based on false hopes that China would change China's export policy. Byrne said the UK urgently needs a coherent China strategy and does not currently have one.
UK Considers Chinese EV Tariffs Amid EU Trade Scheme Discussions
FLASH AIShare
Summary
The UK is weighing tariffs on Chinese electric vehicles if it adopts the EU’s Made in Europe industrial package, according to FLASH AI. A Franco-German proposal would tie the UK to EU tariffs on Chinese EVs under MiCA (EU Markets in Crypto-Assets Regulation) and other trade rules. The UK keeps its trade policy independent but faces pressure to align. Chinese EV brands are gaining market share, while lawmakers aim to finalize the trade scheme by 2027. Tariffs could support local manufacturers but risk higher prices and Chinese retaliation. Risk-on assets may face volatility if trade tensions escalate.
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