U.K. is said to plan tariffs on Chinese EVs under pressure from EU

The U.K. is preparing to impose tariffs on Chinese electric-vehicle imports as it seeks to maintain access to a European manufacturing initiative, the Times of London reported Sunday.

European Union officials have warned that Britain could be excluded from the Made in Europe program unless it takes action, the newspaper reported. Brussels is concerned that the U.K. could otherwise become an entry point for Chinese-made vehicles destined for European markets.

The potential move would bring Britain closer to the EU's tougher trade stance toward China's auto industry. Chinese automakers have rapidly expanded their European presence, helped by competitively priced EVs and growing sales of hybrid vehicles.

U.K. officials are said to have weighed the possibility that Beijing could retaliate against British companies, including Jaguar Land Rover. The government has concluded, however, that the economic consequences of exclusion from the Made in Europe initiative could be greater than the potential damage from Chinese retaliation, according to the Times.

Why it matters for investors

Tariffs could reshape competition in the British auto market by making Chinese EVs more expensive while providing some protection to European and UK manufacturers. The decision could also affect Chinese automakers' European expansion strategies and companies throughout the automotive supply chain. For Jaguar Land Rover and other businesses with significant exposure to China, the possibility of retaliatory measures creates an additional risk.

The issue also underscores Britain's difficult post-Brexit position between two major trading partners. Aligning with EU trade policy could strengthen the UK's integration with European manufacturing and supply chains, but doing so risks worsening commercial relations with China.

Details including the size of any tariffs, which vehicles would be covered and when they might take effect haven't been reported. Those terms will be important in determining the potential impact on automakers, vehicle prices and investment in Britain's EV industry.