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

France has dropped its opposition to the United Kingdom's inclusion in the EU’s "Made in Europe" legislation, provided the UK aligns with the bloc’s position on tariffs targeting Chinese electric vehicles. This shift marks a key development in ongoing negotiations over the Industrial Accelerator Act, a legislative framework aimed at protecting European manufacturing from low-cost Chinese imports. According to a joint Franco-German document obtained by The Guardian, the two nations now propose that the UK, alongside Norway, could be included in the initiative under specific conditions tied to trade defense measures. The proposed inclusion applies particularly to the automotive sector, with the document stating that "Made in Europe" would encompass the EU27 plus an opt-in mechanism for European partners that were members of the EU single market as of January 1, 2020. This explicitly references the UK, which remained within the single market until Brexit. The opt-in would require alignment with EU trade defense measures, including the tariffs on Chinese EVs introduced by the EU in 2024 and any future trade barriers, such as quotas on Chinese hybrid car exports. The conditions also extend to dynamic alignment with EU policies concerning third-country investments and trade defense mechanisms. Liam Byrne, chair of the UK’s business, innovation, science and trade committee, described aligning with the EU on these issues as a necessary step to preserve British manufacturing. He emphasized that the potential economic benefits outweighed the political costs. Mercedes-Benz CEO Ola Källenius, speaking earlier in the week, urged EU leaders to allow the UK to participate in the Made in Europe legislation, warning that excluding the UK would be a "deliberate choice" to harm the broader European automotive industry. The UK government has expressed urgency in securing inclusion, citing fears of losing billions in car industry trade if it is excluded from EU supply chains. Trade Minister Anas Sarwar suggested on Thursday that the UK might be willing to align with EU tariffs on Chinese EVs, telling Politico that the UK and EU must "work together and act in lockstep" to address China’s influence in the automotive sector. However, Business Secretary Jonathan Reynolds previously stated he would not be coerced into aligning with EU policy, highlighting the delicate balance the UK seeks in maintaining its sovereignty while seeking access to EU markets. French and German officials have signaled openness to the UK’s participation, though the final decision will depend on broader European consensus. Bernd Lange, chair of the European Parliament’s international trade committee, called for the UK’s inclusion, dismissing France’s initial resistance as "not rational." The UK government has not yet finalized its position on the specifics of the arrangement, with a Downing Street spokesperson noting that "there is still a European process to run." Nonetheless, the development is viewed positively by pro-industry advocates, who argue that the potential protections offered by the legislation could benefit UK manufacturing and employment. Meanwhile, concerns have emerged from Beijing, with the Chinese Embassy in London expressing firm opposition to any measures perceived as discriminatory toward Chinese products. It warned that such actions would violate World Trade Organization rules and undermine global trade principles. Chinese EVs have gained increasing traction in European markets, with brands such as BYD, Chery, and Changan reporting substantial growth in sales. The EU is expected to finalize the Industrial Accelerator Act by late 2024 or early 2027, with thousands of amendments already submitted by lawmakers. One amendment proposes extending the legislation to include the UK, providing time for UK officials to negotiate the terms they seek. Industry insiders suggest that the EU has demonstrated a willingness to engage in dialogue with China to implement protective measures without triggering retaliatory action. As discussions continue, the UK faces a complex balancing act between maintaining regulatory independence and securing access to critical EU markets.