Don’t expect Britain to copy EU and American tariffs on Chinese cars

LONDON — While its allies slap steep tariffs on Chinese state-subsidized electric vehicles, Britain is sitting tight.
The U.S., EU and Canada have put up barriers this summer after multiple probes found Beijing boosted its EV sector with billions in support, threatening homegrown carmakers. 
But Britain, desperate to decarbonize its economy, thinks it’s found a third way.
It’s mulling an alternative strategy to its allies that could lead to a surge of imports of Chinese EVs to the U.K. And that risks a backlash from Britain’s China hawks concerned about an over-reliance on Beijing in the country’s economy.
A senior figure at a U.K. automaker, specializing in mass-market cars, said the British government is already scoping out “alternatives to going down the anti-subsidy road.” That view was echoed by an auto industry consultant, also granted anonymity to speak candidly.
“We are vigilant to international developments, and will act where we have concerns for the U.K. automotive industry,” said a Department for Business and Trade spokesperson. The government said it is closely analyzing China’s growing role in the global automotive industry.
Cars are the U.K.’s top goods export, with 80 percent of those made in Britain shipped abroad. 
But British factories rolled out 34,094 fewer cars in the first half of 2024, down 7.6 percent on 2023, “as manufacturers retool lines to make electrified models,” according to Britain’s automotive lobby, the Society of Motor Manufacturers and Traders (SMMT).
Starmer’s Labour government is in a tight spot. It’s sticking by an election manifesto pledge to ban the sale of new combustion engine cars by 2030. 
But while the pressure is on to boost EV imports, his business and trade chief Jonathan Reynolds is also drawing up an industrial strategy to encourage global automotive firms to invest in more factories in the U.K.
“All these things are not necessarily compatible,” the senior automotive figure said, adding Labour has “got some pretty difficult choices to make in the autumn.”
Behind the scenes, the U.K. government is weighing up whether to follow its Western allies in hitting Beijing. Ministers want to avoid a trade war with China that could hurt the economy.
Officials are “trying to boil the ocean” in their research, the senior automotive figure said, by also examining “what might happen to Chinese investment” in the U.K. if it does impose tariffs.
The British government is “increasingly aware of different trade-offs associated with intervening” against Chinese EV imports, said Sam Lowe, a partner at Flint Global specializing in trade and EVs. 
The risks are real: Beijing has retaliated against steep EU duties on Chinese EVs in July with anti-subsidy investigations against EU dairy, pork and brandy. While Beijing last month decided not to impose tariffs on EU brandy for now, it is also challenging the EU’s tariffs at the World Trade Organization.
Several sectors across the British economy, including luxury carmakers, are urging Starmer’s government to tread carefully.
That means the U.K. is unlikely to ultimately copy its allies’ tariffs on Chinese EVs. “We don’t want to close the U.K. economy down to imports and exports. We benefit from those trade links around the world including with China,” Chancellor Rachel Reeves said in a July interview.
“This issue about what [Chinese] retaliation would mean, for exporters, as well as what the tariffs would mean for inflation here is something that the Treasury has considered as the primary argument,” said a senior British business lobbyist briefed on the government’s thinking.
Reeves’ most recent intervention is sharply at odds with her messaging ahead of the U.K. election in May when she said reliance on Chinese EVs would undercut British workers and “leave us incredibly exposed.”
After the chancellor backed away from tariffs, Stella Li, European head of Chinese EV giant BYD, said “the U.K. can very rapidly become the next country with very strong EV adoption.”
If Britain does stay out of the tariffs game, there could be clear knock-on effects for its domestic carmakers. As Britain’s allies erect tariff walls there’s an “obvious” risk Chinese electric vehicle exports will be diverted to the U.K., Nick Baird, chair of Britain’s trade watchdog the Trade Remedies Authority (TRA) told POLITICO early this year.
There are already signs this is happening. Chinese automakers are targeting Britain and Norway, another non-EU nation, with more electric vehicle exports, analysis from consultancy Schmidt Automotive Research shows. The U.K. will be “a major catalyst” for Chinese auto sector growth in 2024, Mathias Schmidt, founder of the consultancy said.
Chinese brands are hoping to cash in on the increasing demand for EVs generated by the U.K.’s new zero emissions vehicle rules, he added.
“We’re in the foothills at present in terms of what the market impact might be,” said the senior automotive figure quoted at the top of the piece. “If we start to see that number creeping up substantially, then it might put additional pressure on the U.K. government to yank this up the priority table.”
Rather than investigate Chinese state subsidies, U.K. officials are biding their time to find out whether imports of Chinese EVs really do surge. “They’re just going to wait and see what the impact of the tariffs is both in terms of China’s response and in terms of whether it leads to a significant uptick in imports into the U.K.,” said Flint Global’s Sam Lowe.
That’s where a third option could come into play: temporary import restrictions, known as safeguards.
“Safeguards is one of the ways you would address the fear of there being a surge because of trade diversion,” Lowe added.
Safeguards are complicated to manage, said Mona Paulsen, an expert in international trade law at the London School of Economics, as they need to apply to all EV imports “in a non-discriminatory way,” with quotas carved out for all affected nations.
But the “most complicated choice is still, long-term, the best choice,” she argued. “Electric cars are a really important part of greening the world economy.” Unilateral tariffs by Canada and the U.S. threaten the World Trade Organization’s global trade system, she added. “The key here is that if you try to operate within the system, then, long-term, you’re protecting that system. That’s the important thing.”
The clash between the government’s green and security agendas is already apparent, said Sam Hogg, an expert at the Oxford China Policy Lab. “Where are you going to get these EVs if they’re not from China? Or are you going down the security line on this and you’re worried about security aspects to EVs arriving in this country?” he asked.
“These are really complex questions and they require unbelievably painful political trade-offs and also consumer trade-offs,” he explained. “You have to face up to that stuff. Very little I see from British politics, in general, indicates that people are willing to talk about difficult trade-offs.”
Jordyn Dahl contributed reporting.