China threatens UK with retaliation over electric car tariffs
China has warned the UK of a possible trade war if London decides to impose import tariffs on Chinese electric cars similar to those introduced by the European Union. Britain faces a difficult choice: protect its automotive industry's interests in Europe or maintain favourable trade relations with China.
China's commerce ministry said the UK should follow World Trade Organization rules and should not automatically adopt the European Union's protectionist policies. Beijing pledged to take strong countermeasures to protect Chinese carmakers' interests if restrictions were imposed.
European Union puts pressure on Britain
The UK is considering raising tariffs on Chinese electric cars primarily because of its negotiations with the European Union. London wants to join the “Made in Europe” programme supporting European industry, which would give local manufacturers advantages in public procurement.
France and Germany have offered Britain the opportunity to participate in the programme, but expect a similar trade policy towards Chinese cars in return.
In 2024, the European Union imposed additional tariffs on electric cars made in China. Combined with the standard 10 per cent import duty, these reach up to 45.3 per cent, depending on the manufacturer. The UK has so far maintained a tariff of just 10 per cent.
Jaguar Land Rover could be hit
The British government's caution is no coincidence. The UK's automotive industry depends heavily on exports, and Chinese retaliation could hurt luxury carmakers in particular.
One of the companies most exposed to the risk is Jaguar Land Rover, for which China is an important sales market. Potential retaliatory tariffs would make British luxury cars more expensive there and weaken their competitiveness.
Meanwhile, Chinese manufacturers are gaining momentum in the UK. BYD, MG and Chery currently operate under considerably more favourable conditions than in the European Union market. Higher tariffs could quickly erode their price advantage.
A trade war could prove costly
British Business Secretary Jonathan Reynolds has stressed that London will not impose additional tariffs on Chinese cars merely because of European Union pressure. The government is nevertheless considering various options, taking into account the interests of both the domestic automotive industry and export markets.
From European carmakers' perspective, the UK's adoption of a common tariff policy would create another trade barrier for Chinese competitors. For consumers, however, it would probably mean more expensive electric cars and less price competition.
The UK therefore faces an uncomfortable choice. Securing better access to the European market could damage relations with China, while maintaining its existing free-market approach could weaken British carmakers' position in the European Union.
