The UK is exploring the possibility of joining the EU's Made in Europe initiative, which could involve imposing tariffs on Chinese electric vehicles (EVs). This consideration comes after France lifted its opposition to UK involvement in the scheme, which aims to counter subsidized Chinese imports by promoting EU products.
Beijing has reacted strongly, labeling the potential tariffs as discriminatory. The Chinese embassy in London argues that such measures would breach World Trade Organization (WTO) rules and undermine market fairness.
Downing Street sees a potential opportunity to join the Industrial Accelerator Act but remains cautious about the conditions. A spokesperson emphasized that it is premature to predict any specifics of an EU agreement, noting that the UK maintains its own trade policy and regularly reviews tariffs with input from the British automotive industry.
The Franco-German plan would require the UK to align with EU trade defense measures, like tariffs on Chinese EVs, to participate in the initiative. While this could benefit UK manufacturers by reducing the influx of cheaper Chinese models, it might also raise prices for consumers and complicate the export of UK-made vehicles to China.
Chinese EVs are making inroads, with brands such as BYD, Chery, and Changan reporting significant sales growth. In September alone, BYD's sales increased 78% year-on-year, Chery's market share surged by 660%, and Changan's expanded by over 3,000%.
EU lawmakers aim to finalize the Industrial Accelerator Act by the end of the year or early 2027. The process is complex, with over 5,100 amendments proposed, including one that would allow the UK to join. The proposal allows European partners who were part of the EU single market as of January 1, 2020, to opt-in if they agree to align with EU trade defense measures.
Ola Källenius, CEO of Mercedes-Benz and president of the European car trade body ACEA, warned that excluding the UK from the legislation would be a conscious decision by EU leaders to harm the car industry across Europe. About 80% of cars made in the UK are exported, with over half going to the EU and 6% to China.
Trade Minister Anas Sarwar expressed openness to aligning with EU tariffs, emphasizing the importance of UK-EU collaboration to address China's influence in the automotive sector. However, Business Secretary Jonathan Reynolds voiced reservations about being pressured into following EU policy.
China opposes any increase in EV tariffs and has threatened a trade war if quotas are imposed on Chinese hybrid cars. While quotas can be implemented quickly under WTO rules, imposing tariffs on Chinese cars could take over a year, requiring a formal investigation and evidence of damage to the British car industry.
Liam Byrne, chair of the parliamentary business committee, argued that tariffs on Chinese EVs would be a small price to protect the UK and EU car industries. He criticized the government’s strategy on China, urging a coherent approach to ensure the future of British and European manufacturing.
