Government faces pressure to decide on Chinese EV tariffs amid 2030 ICE phase-out

The Labour government, which has committed to reinstating a 2030 deadline for phasing out new ICE car sales, is coming under pressure to decide whether to follow the EU and US in raising duties on Chinese EV imports.

Britain's business secretary Jonathan Reynolds is reported to be closely monitoring the situation and consulting with industry leaders on the next steps after a meeting with EU trade commissioner Valdis Dombrovskis at a G7 ministers’ meeting on July 16.

“Any solution would have to take the UK’s auto sector exports into account and be calibrated for the UK economy,” stated a government summary of the talks.

“I am not ruling anything out but, if you have a very much export-orientated industry, the decision you take [has to be] the right one for that sector,” the FT reported Reynolds as saying.

The FT report also said that UK government insiders noted that the British car sector has not formally asked the UK Trade Remedies Authority to launch an investigation into Chinese EV imports, a move required for the UK - not a EU member state - to launch a probe.

On June 12, the European Commission announced that it would apply provisional countervailing duties on Chinese-made EVs based on the results of its nine-month investigation into the levels of state subsidies received by different Chinese or China-based carmakers. This unfair support, it believes, results in hefty distortions in the European market.

The move by the Commission followed a May 14 declaration by the United States which said it will increase tariffs on Chinese EVs and certain hybrids to 100% from August 1.

The new European duties, which are set to be added to the existing 10% tariff, will apply to BYD: 17.4%;  Geely: 19.9% - revised down from the provisional 20%; and SAIC: 37.6% - revised down from 38.1%.

Other EV manufacturers in China, which cooperated in the investigation but were not sampled, are subject to the 20.8% weighted average duty. The duty for other non-cooperating companies is 37.6%.

The investigation has four more months to run at which point the Commission may propose definitive five-year duties. EU member states are required to vote those through although a recent indicative vote has demonstrated wariness over the impact of additional tariffs on global trading relationships.

A dozen EU members are reported to have voted in support of the tariffs, four voted against and 11 abstained. In the vote, France, Italy and Spain are reported to have supported the tariffs while Germany, Finland and Sweden abstained.

Germany, whose automotive industry derives a third of its annual revenue from China and which has been critical of the additional tariffs, reasoned that its abstention was in the spirit of "critical solidarity" with the Commission.

The Commission is expected to take this into account when deciding whether to propose definitive duties. Even so, they would be subject to a binding vote among EU member states and a qualified majority of 15 member countries representing 65% of the EU population - could still vote against them.

Meanwhile, the European Commission has indicated to Volkswagen and BMW that it may consider reducing tariffs on their China-made EV imports.

Bloomberg reports that the Commission might classify these car makers as ‘cooperating companies’, making them eligible for a 20.8% on their China-made models, compared to the current plan's 37.6% tariff.

A European Commission spokesperson stated that they are examining numerous requests from companies that do not manufacture EV cars in China during the investigation.

The European Commission maintains that it is willing to engage in further technical discussions with China to find a 'mutually acceptable solution'.