Can Britain really afford to diverge from EU tariffs on Chinese EVs?

The European Union’s demand that Britain raise tariffs on Chinese cars exposes an awkward truth about post-Brexit trade. Britain might have left the EU, but it cannot easily escape the bloc’s industrial policy.

According to the Financial Times, EU officials have told Prime Minister Andy Burnham that Britain needs to align more closely with EU trade policy towards China if it wants British manufacturers to avoid discriminatory treatment under the bloc’s proposed “Made in Europe” rules. The proposal is tied to a larger European effort to favour locally produced goods in public procurement and state-supported schemes, including the automotive sector.

The timing is not accidental. China’s car export machine is accelerating. Its electric vehicle (EV) exports in August rose 33 per cent year on year to more than 284,000, while year-to-date exports as of the end of August were more than 2.1 million, up 53 per cent year on year. Almost 95,000 of those exports went to Europe in August.

Following its anti-subsidy investigation in 2024, the EU has imposed countervailing duties ranging from 7.8 to 35.3 per cent on Chinese battery EVs. In contrast, Britain has retained a standard tariff regime that is less punitive towards Chinese cars. That has helped turn the UK into an important market for Chinese manufacturers. Chinese-made cars accounted for 14 per cent of British new-car sales in 2025, according to the European Automobile Manufacturers’ Association.

Refusing to follow Brussels preserves something economically valuable for London: competitive pressure in a market undergoing a transition to EVs. Chinese manufacturers bring lower-cost models, rapid product cycles and intense competition. Higher tariffs would ultimately be paid through some combination of lower margins for manufacturers, higher prices for consumers or reduced choice. At a time when Britain is trying to accelerate electrification, that is not a trivial consideration.

There is also a strategic advantage in retaining an independent tariff policy. Britain can use access to its market as leverage in negotiations with Beijing and other trading partners rather than automatically signing on to the EU’s choices. The UK is a significant trading partner for China, and Chinese goods accounted for 11.2 per cent of British goods imports in the 12 months to July. Maintaining room for manoeuvre could matter as supply chains, technology restrictions and industrial subsidies become increasingly entangled with geopolitics.

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However, Europe remains the gravitational centre of British automotive manufacturing. The EU received 60.4 per cent of UK vehicle exports in 2025, while EU-made cars represented 61 per cent of British sales. The British and European industries are also deeply intertwined through components, batteries, investment and logistics.

That makes the “Made in Europe” regime potentially more consequential than the tariff. European procurement incentives, subsidies and other industrial preferences that discriminate against British-made vehicles or products with insufficient European content could put British manufacturers at a competitive disadvantage in their largest export market. The Society of Motor Manufacturers and Traders estimates UK-EU automotive trade at around €80 billion (US$90.8 billion) a year and warns that exclusion from the EU initiative could erode scale and investment on both sides.

Following Brussels’ advice could therefore buy London something valuable: insurance against fragmentation of the European automotive market. The immediate pay-off from this would be continued access to procurement and incentives while maintaining integrated supply chains. It could also reduce the risk that manufacturers react to regulatory divergence by moving future investment away from continental Europe.

There is also a geopolitical dividend. More harmony would imply that Britain is ready to work with its European neighbours on economic security at a time when China’s industrial surplus is becoming a key concern for advanced economies across the board.

Commerce Minister Wang Wentao has called on Europe to avoid protectionism while signalling Beijing’s support for Chinese carmakers investing inside Europe. That points to a future where the location of production is almost as important as the nationality of the company.

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However, tariff alignment is not without costs. Britain would be helping protect European producers from Chinese competition while imposing additional costs on British consumers and potentially weakening one of the forces accelerating the EV transition. It could also reduce London’s bargaining power with Beijing without guaranteeing that Brussels will grant British companies full access to its “Made in Europe” benefits.

The real choice isn’t whether to be tougher or softer on China. It is between two models of economic sovereignty. One gives Britain more freedom to set its own tariffs and foster competition; the other gives deeper integration into the industrial ecosystem on which much of British manufacturing still depends.

The uncomfortable lesson for London is that tariff autonomy is only valuable if it can be turned into a concrete economic or strategic advantage. If not, London could find that the threat of exclusion from Europe’s industrial market gives Brussels considerable leverage.