Downing Street declined on Friday to rule out Chinese EV tariffs as part of a possible UK attachment to the EU's Made in Europe package, a day after a Franco-German proposal opened a route for Britain to join the Industrial Accelerator Act.

UK could opt in to the Industrial Accelerator Act

A proposal tabled on Thursday night would let the UK opt in to the Industrial Accelerator Act, provided it dynamically aligns with the EU's 2024 tariffs on Chinese electric cars - trade defence measures introduced under the Made in Europe push. The opt-in covers European partners that were inside the EU single market as of 1 January 2020, bringing in both the UK and Norway.

• •The Made in Europe rules are designed to curb subsidised Chinese imports by giving EU-made products preferential treatment.
• •France has dropped its opposition to Britain taking part, and Downing Street said it would welcome the objective of UK inclusion.
• •MEPs have tabled 5,100 amendments to the legislation, one of which embraces the UK.
• •Both the UK and Norway worry about being left at a disadvantage if they stay outside the scheme.

Beijing warns against discriminatory tariffs

Beijing warned that any move to raise tariffs or place restrictions on Chinese goods would amount to discrimination, and said it firmly opposes such steps. The Chinese embassy in London said it had raised its serious concern with the UK directly, arguing that trade protectionism runs counter to WTO rules and market principles.

European Commission officials have described Beijing's language over a related plan to impose quotas on Chinese hybrid cars as "bloodcurdling threats" to launch a trade war.

UK ministers divided on aligning with Brussels

Business secretary Jonathan Reynolds said this week that the EU's policy is not something he would accept under duress. Trade minister Anas Sarwar, by contrast, told Politico the UK and EU must work together and act in lockstep in response to China's dominance in the automotive sector.

Liam Byrne, the Labour chair of the parliamentary business committee, said tariffs on Chinese EVs would be "a small price to pay" to save the industry in both the UK and the EU. Speaking at a London conference on Thursday night, he said the country "urgently needs" a new strategy on China so British and European manufacturing does not die, and criticised the government's approach as naive and resting on false hopes that China will change its export policy.

What is at stake for the car industry

The government fears billions of pounds of car industry trade could be lost if UK manufacturers are locked out of EU supply chains, which is why exclusions from the scheme worry both London and Oslo.

• •Roughly eight in ten British-built cars leave the country, and while over half of those head for the EU, China accounts for 6%.
• •Chinese brands are gaining ground at home: BYD's UK sales rose 78% year on year in September, Chery's rose 660%, and Changan's market share grew by more than 3,000%.
• •Timing differs by tool: quotas can be introduced within months under WTO rules, but imposing tariffs on Chinese cars could take more than a year, beginning with notification of an investigation.
• •Industry figures see risks on both sides - tariffs could shield UK manufacturers from cut-price Chinese models yet push up consumer prices and hurt British exporters to China in an escalating trade war.

A car industry source said the EU has recently shown that dialogue with the Chinese can deliver some form of safeguarding without retaliation. Ola Källenius, who leads Mercedes-Benz and presides over the ACEA carmakers' association, has cautioned that if EU leaders exclude Britain they would be wilfully damaging their own car industry.

A No 10 spokesperson said any guesswork about deal terms was premature, noting the UK obviously has its own trade policy and it keeps all tariffs under review, with a European process still to run. EU lawmakers are expected to wrap up work on the Industrial Accelerator Act by the end of the year or early 2027.