Britain welcomed Chinese EVs. Now it faces a difficult choice

The U.K. broke with the U.S. by opening its doors to China’s electric vehicle juggernaut.

Chinese EVs face only a 10% standard import duty in Britain, one of the largest major overseas markets without additional China-specific tariffs. Japan and Norway also lack them.

It’s in contrast to the U.S., where a 100% tariff effectively shut Chinese EVs out. The European Union, the U.K.’s biggest trading partner, has manufacturer-specific duties on Chinese EVs of up to 35.3%, in addition to a standard 10% import duty on all foreign cars.

Now, the U.K. faces a difficult choice, as EU proposals may force it to impose tariffs to match the bloc’s.

At the weekend, The Sunday Times reported that U.K. Business Minister Jonathan Reynolds is considering matching the EU’s levy on Chinese EVs to avoid the pain of so-called “Made in Europe” proposals, which could hurt domestic companies selling into the EU.

A U.K. government spokesperson reiterated to CNBC that it had not imposed tariffs on Chinese EVs but added: “We continue to engage closely with industry so that our approach reflects the sector’s and UK’s national interests.”

The Made in Europe legislation, part of the EU’s Industrial Accelerator Act, is designed to protect the bloc’s industries from unfair international competition by prioritizing European-made goods.

An EU official told the Financial Times in September that London would need to raise tariffs on Chinese EVs and align more closely with EU trade policy to avoid “Made in Europe” barriers.

The decision is finely balanced, given Prime Minister Andy Burnham’s desire to reset relations with the EU, which the U.K. formally left in 2020, and the likelihood of China responding with retaliatory measures.

A spokesperson for the Chinese Embassy in London said it had expressed “serious concern” to Britain about the reports about potential tariffs.

“China is firmly opposed to any discriminatory practice involving tariff hikes or restrictive measures on Chinese products,” a spokesperson said Tuesday. “We will continue to follow developments and respond accordingly,” they said.