The UK could be left in a difficult position in the coming months as demand for electric vehicles falls and a growing number of voices, including GB News presenter Nigel Farage, warn that tariffs on cheap electric cars from China are "unavoidable".
China has become the target of tariffs this year in response to its exports of cheaper electric vehicles. Many governments are worried about Chinese electric vehicles and the impact they could have on established Western brands as drivers transition to zero emission vehicles.
The UK has yet to act on any warnings from the automotive industry, as well as China, the European Union, Canada and the United States and it is unclear whether the new Labour Government will choose to pick that battle.
The United States was the first major nation to take decisive action against China when the Biden-Harris Administration announced that the tariff rate on electric vehicles under Section 301 of the 1974 Trade Act would rise from 25 per cent to 100 per cent in 2024.
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The UK has yet to impose sanctions on China for rolling out cheaper electric vehicles
REUTERS/GETTY/PA
It cited fears around China flooding the market with cheap EVs, with hopes that the tariffs would protect American manufacturers from "unfair practices".
This was followed by Canada adopting a similar tactic to impose a 100 per cent tariff on Chinese-made electric vehicles, with further duties on Chinese steel and aluminium.
While the European Union only confirmed its tariff plans in October, the bloc had been negotiating on which tariffs should be attributed to which manufacturers.
Ultimately, it was agreed that BYD would be subject to a 17 per cent tariff, while Geely (18.8 per cent) and SAIC (35.3 per cent) would see higher duties. Other cooperating companies will be subject to a duty of 20.7 per cent, while non-cooperating companies face a tariff of 35.3 per cent.
In March, former Transport Secretary Mark Harper suggested that the UK would introduce harsh new tariffs on China in response to "car dumping".
BYD escaped the harshest tariffs from the European Union
REUTERSHe acknowledged that people were concerned about the rising number of Chinese electric vehicles in the UK, mainly down to the cost of new electric vehicles and competitiveness between established brands.
Harper pointed to "very robust measures" and praised the UK for having a "good legal structure" to create a level playing field for all manufacturers.
A Government spokesperson told GB News: "We are always vigilant to international developments and are very clear that any decision over the implementation of tariffs has to be the right one for our domestic automotive industry.
According to new data from the Society of Motor Manufacturers and Traders (SMMT), Chinese brands are already making headways into the UK market with BYD selling 6,040 vehicles so far this year, as well as Omada with almost 2,000 sales and GMW Ora with 1,127 new registrations.
Auto Trader has noted that other Chinese-owned brands like SAIC's MG and Maxus, in addition to Geely's Volvo and Polestar, are all retaining or developing their market share in the UK.
BYD advertisements were seen throughout the Euros over the summer
PAChinese brands have also been working to make their presence in the UK and across Europe more prominent. BYD was the official e-mobility partner of the European Championships in Germany this year, while also opening new showrooms around the country.
Speaking on his GB News show, Nigel Farage said one of the largest problems currently putting the jump to net zero in jeopardy was the slowing sale of electric vehicles across Europe and the UK.
He noted that the European Union, and other major nations, had imposed tariffs on Chinese-made electric vehicles and batteries to protect established car companies and ensure brands do not collapse.
The Reform UK leader added: "Donald Trump has fought the election, winning in the car-making areas like Detroit by saying, I'll protect you from cheap imports from China. We find ourselves outside the European Union. We find ourselves still stuck to net zero targets.
"Isn't it actually that [EVs] are not much use? I can't drive from home to Cornwall without stopping for 25 minutes. Even with the infrastructure, the range of these things is way below expectations.
Nigel Farage said that it was 'almost unavoidable' for the UK to impose tariffs on China
GB NEWS"The purchase price, until China flood the market, are very, very high. I think [tariffs on Chinese EVs] are almost unavoidable."
Farage also spoke about driving a Tesla was "great fun", but claimed that "they still don't work" for many people in practical terms. Tesla has been assigned a duty of just 7.8 per cent from the European Union.
With CEO Elon Musk's close relationship with incoming President Donald Trump, the electric vehicle manufacturer could skate around other tariffs, despite manufacturing almost one million vehicles in Shanghai, China, last year.
Some manufacturers are already feeling the effects of the tariffs on China, including Geely-owned Polestar, which said it would "effectively" be banned from selling its cars in the United States in reference to the Government's duties.
Greta Peisch, the most recent General Counsel of the Office of the United States Trade Representative (USTR), suggested that the UK Government could follow the lead of the United States, European Union and Canada in imposing tariffs, especially if Labour wants to set the tone for the coming years.
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The Government told GB News that it was always 'vigilant' to any threats to UK manufacturing
GETTYShe told GB News that the UK would be "watching very closely" at its close trade partners if tariffs are necessary. However, given the vast Chinese investments in the automotive markets of Europe and the UK, it may be difficult.
Peisch, who worked on US tariff action against China on electric vehicles, chips and more, added: "You've heard former President Trump talk about raising tariffs even higher on Chinese EVs and addressing the issue of potential Mexican production.
"I'm not sure whether it makes a difference whether it's higher than 100 per cent or not. What happens in the EU is much more directly impactful for the UK, even more so than the US and Canada given the integration of the markets.
"It's a global marketplace for vehicles. The US can't address this problem truly on its own. [The more tariffs and cooperation], the more effective it will be for all of us."
She noted that it could be possible that countries outright block imports of vehicles from China, especially as the United States cites issues regarding national security fears with connected vehicles.
China is the third-largest market for UK vehicle exports
PAPeisch said that China would not drastically escalate the situation on these trade matters, but that the UK, EU and US would need to look at the trajectory of Chinese exports and what the impact would be on the UK market.
SMMT data shows that 7.2 per cent of cars exported by the UK were to China, just behind the United States (15.4 per cent) and the European Union (55.4 per cent).
Peisch said that the UK didn't need to look at the "tit-for-tat today", but rather forecast what that could mean for the UK industry going forward, especially if China retaliated with tariffs on UK-made cars.
