EU working with Britain to avoid 10% electric vehicle tariffs

Por Graham Lanktree, Carlo Martuscelli, Camille Gijs — China – POLITICO

LONDON — The European Commission is working with the U.K. to avoid a cliff edge that threatens to raise the cost of cross-channel electric vehicle exports by 10 percent from the start of next year.

EU Trade Commissioner Maroš Šefčovič and U.K. Trade Secretary Jonathan Reynolds made progress on the talks when they met on the sidelines of last week’s G20 trade ministerial in Milwaukee, according to an official U.K. readout shared with POLITICO.

The tariffs threaten efforts to attract fresh investment into U.K. carmaking, undermining the reindustrialization drive at the heart of Prime Minister Andy Burnham’s economic agenda.

Šefčovič told Reynolds that the extra duties, which are due to take effect in less than three months, are in neither side’s interest and that the EU is “working to avoid a tariff cliff edge,” the readout said.

Under the tightening rules of the Brexit trade deal, a vehicle with enough of its parts made in the EU or U.K. — at least 55% of an electric vehicle, at least 70% of the battery pack and 65% of a battery’s cells — can continue to cross the Channel tariff-free.

But any vehicle that doesn’t meet those strict local content rules will face a 10% duty from the start of next year.​

Britain’s automotive lobby, the SMMT, estimates that the additional tariffs would threaten £16.4 billion in cross-channel trade in EVs as a number of major automakers source their batteries from China.

“Additional costs on the very vehicles that British and European consumers are being encouraged to buy would be self-defeating,” Mike Hawes, chief executive of the SMMT, said.

“At a time of intensifying global competition, the U.K. and EU should find solutions that strengthen our industrial cooperation and integrated supply chains, not create new barriers that would undermine competitiveness, jeopardise investment and restrict consumer choice.”

The European Commission “is aware of certain challenges related to the implementation of these rules of origin have arisen,” Olof Gill, the EU Commission’s deputy chief spokesperson, said.

Brussels, Gill added, “remains committed to sending a strong market signal for zero-emission vehicles, while supporting the production of vehicles, batteries and cathode materials that are made in the European Union.”

Searching for a solution

The two sides have been eyeing a technical workaround that would clarify the rules concerning the level of cathode active material used in lithium-ion batteries that could come from third countries like China.

During his meeting with Šefčovič in Milwaukee, Reynolds also “underlined that resolving ‘Made in Europe’ issues was important to both U.K. and EU interests,” according to the readout.

British ministers have been lobbying Brussels to ensure U.K. automakers qualify as European so they can access public procurement contracts, tax incentives and subsidies under the nascent Industrial Accelerator Act, new legislation to spur home-grown green manufacturing.

Some EU officials are warning that Britain’s automotive sector won’t be counted as European if London doesn’t align with EU tariffs on Chinese EVs. Chinese state-subsidized vehicles have faced additional tariffs as high as 35% since 2024, while the U.K. has not imposed tariffs.

“We’re afraid that if they don’t align, trade policy could become a Trojan horse for China,” an EU official said.

“For 10 years, we’ve been afraid of ‘Singapore-on-Thames.’ But the danger is ‘Turkey across the Channel. They need to align, especially on BEVs and PHEVs,” the official said, referring to battery-powered EVs and plug-in hybrids.

Britain is keeping tariffs on Chinese electric vehicles “under review,” Reynolds told the POLITICO Pub at Labour Party conference early last week, before his meeting with Šefčovič.

But he pointed out that the U.K.’s automotive sector is divided and “different parts of our own [automotive] sector want different things from” the government’s tariff policy.

Sam Lowe, an automotive trade expert and partner at Flint Global, said: “The EU has been pressuring the U.K. to put tariffs on Chinese EVs for a while — it was always likely the U.K. would need to align if it wants progress on issues such as ‘Made in Europe’ or the end-of-year rules-of-origin cliff edge.”

U.K. officials insist that no decision has been made. A U.K. government spokesperson said: “We continue to engage closely with industry so that our approach reflects the sector’s and U.K.’s national interests.”

A move by the U.K. to put up tariffs on Chinese EVs “would need to be based on robust evidence, follow due process and reflect the interests of consumers, manufacturers, investors and exporters,” said the SMMT’s Hawes.

Fonte: China – POLITICO