No 10 leaves option open to impose Chinese EV tariffs if UK joins EU scheme

The Industrial Accelerator Act, also called the Made in Europe package, is proposed EU legislation for industrial policy. Its central aim is to curb subsidised Chinese imports. It would do this by giving products made in the EU preferential treatment in relevant markets or public support schemes.

The proposal matters because countries outside the EU could be disadvantaged if they are excluded. The UK and Norway are concerned about losing access to European supply chains. A Franco-German proposal would allow some European partners to opt in, but only under strict conditions.

EU lawmakers are expected to finalise the legislation by the end of 2026 or early 2027. MEPs have already tabled 5,100 amendments. One amendment would include the UK, potentially allowing it to remain connected to European car-industry supply chains.

The UK wants to join because exclusion could leave British manufacturers outside important European supply chains. Downing Street said it welcomed the objective of including Britain. The government fears that billions of pounds in car-industry trade could be lost if the UK is locked out.

The proposed price of entry is dynamic alignment. Under the Franco-German plan, the UK would have to align with EU conditions affecting investments from third countries. It would also need to follow relevant EU trade-defence measures, such as tariffs on Chinese electric vehicles.

That requirement remains unresolved. Business secretary Jonathan Reynolds said he would not be coerced into following EU policy. No 10 called it premature to speculate about the deal, while saying the UK keeps all tariffs under review and has its own trade policy.

The UK car industry has major international exposure. About 80% of cars made in Britain are exported. More than half of those exports go to the EU, while 6% go to China. This makes trade rules especially important for British factories and their workers.

Chinese electric-vehicle brands are also gaining ground quickly in the UK. BYD sales rose 78% year on year in September. Chery sales increased 660%. The lesser-known Changan recorded an increase of more than 3,000% in market share.

These figures help explain the political pressure. Tariffs might shield UK-based manufacturers from cut-price imports, but trade retaliation could threaten their overseas sales. Any decision must therefore balance protection at home against access to the international markets on which the industry relies.

Tariffs on Chinese electric vehicles are import charges applied when those vehicles enter a market. They are being considered because Chinese manufacturers are accused of benefiting from subsidies. The EU introduced tariffs on Chinese EVs in 2024, and the UK could be expected to align with them.

The mechanism is straightforward. A tariff raises the cost of an imported vehicle. That can narrow the gap between a subsidised Chinese model and a vehicle made by a British or European manufacturer. It may therefore help domestic producers compete against cut-price imports.

However, tariffs are not cost-free. They can raise prices for consumers and provoke retaliation. The Chinese embassy in London called tariff hikes discriminatory and said protectionism conflicts with WTO rules and market principles. The UK has not yet decided whether to impose them.

If Britain imposed tariffs, Chinese electric vehicles would become more expensive to bring into the UK. That could prevent cut-price models from flooding the market and give UK-based manufacturers more room to compete. Liam Byrne called tariffs a small price to pay to protect the industry.

The main risk is that consumers could face higher prices. British manufacturers might also suffer if China retaliated. Their exports are important: about 80% of UK-made cars are exported, with 6% going to China. Retaliation could make those vehicles harder or more expensive to sell there.

The result could depend on whether China responds with trade restrictions. Chinese officials have already warned against discriminatory tariff increases. European Commission officials have described earlier Chinese threats over hybrid-car quotas as “bloodcurdling”, raising fears of an escalating trade war.

The UK government wants inclusion in Made in Europe because it fears losing access to EU supply chains. It also insists that Britain has its own trade policy. The EU is considering whether to include the UK, provided it accepts dynamic alignment on investment conditions and trade-defence measures.

China opposes expanding tariffs on its electric vehicles. Its London embassy called such measures discriminatory and warned that protectionism conflicts with WTO rules and market principles. Chinese officials have also warned of possible retaliation over European trade restrictions.

The car industry generally wants continued access and protection from unfair competition. Mercedes-Benz boss Ola Källenius said excluding the UK would deliberately hurt the European car industry. A UK industry source said dialogue with China might secure safeguards without retaliation. Some UK politicians, including Liam Byrne, favour tariffs to protect manufacturing.

Tariffs can begin a cycle of retaliation. A country raises import charges to protect its producers, and the targeted country may respond against the first country’s exports. In this dispute, that could damage British car sales in China and expand into a wider trade war.

The article gives a clear example of the mechanism. European Commission officials said China had made “bloodcurdling threats” over plans for quotas on Chinese hybrid cars. China’s embassy also warned that tariff hikes and restrictive measures were discriminatory. Such responses could affect manufacturers on both sides.

WTO rules impose limits and procedures. Quotas can be introduced within months, but tariffs on Chinese cars could take more than a year. Britain would need to notify an investigation, gather evidence, and share information about alleged harm to its car industry. China says protectionism conflicts with WTO rules.