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Britain to consider tariffs on flood of cheap Chinese electric cars

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Imports of cheap Chinese cars could destroy Western manufacturing, carmakers warn – AFP via Getty Images

Britain is poised to launch an investigation into cheap Chinese electric vehicles coming on to the market amid fears a flood of cars subsidised by Beijing will destroy local manufacturing.

On Tuesday it emerged that officials at the Department for Business and Trade have discussed an intervention amid concerns that China has given its car makers an unfair advantage through vast subsidies.

A similar investigation has already been launched by the European Union, while the US has warned China against over-producing EVs and then dumping them in foreign markets.

Those moves have triggered a furious reaction from Beijing, which has threatened retaliation against Western products.

In recent weeks, “the wheels have started turning” on a possible UK investigation, a car industry source told the website Politico. Officials are said to be examining “what those options might look like”.

An official investigation could result in tariffs if authorities conclude Chinese manufacturers have enjoyed unfair support from Beijing.

A spokesman for the Government did not deny the Politico report but said there had been no formal request for an investigation from car makers yet, a necessary trigger.

The move to investigate was backed by the Labour Party, which polls say is on course to win the next election.

Jonathan Reynolds, Labour’s shadow business secretary, said the UK should be willing to apply “trade remedies” – tariffs – if it is found that Chinese brands have gained an unfair advantage over their European peers.

Asked about the issue at the MakeUK manufacturers conference on Tuesday, he said: “There are some sectors where I look at just the sheer overcapacity that’s coming out of China and I worry that is inconsistent with how a healthy, global market economy should operate.

“Where there is a concern that we’re not facing free and fair and healthy competition, we’re right to use trade remedies as an answer to that.”

Brands such as Shenzhen-headquartered BYD and Chinese-owned MG have recently launched EVs in Britain priced at around £25,000, which is roughly £5,000 cheaper than an electric Mini and £15,000 less than an entry-level Tesla Model 3.

EVs are still too expensive for many households, meaning a crackdown on cheaper Chinese cars may not be universally welcomed.

However, there are fears that an influx of subsidised EVs from China could cripple the UK and European car manufacturing industries.

Western manufacturers have complained they are being undercut by Chinese brands that they struggle to compete with on price.

French car giant Renault has previously warned of an “invasion” of cheap Chinese electric cars in Europe.

It is understood that Labour is still debating measures to make EVs more affordable for Britons should the party win power, with insiders keen to avoid doing anything that could unwittingly end up subsidising cars made in China.

Mr Reynolds said: “I want a strong trading relationship with China where that is in our mutual interest.

“But there are more sensitive sectors and you can’t simply treat China like you would, for instance, a US or European partner. That’s just a fact of life.”

An investigation into Chinese EVs could be requested by Kemi Badenoch, the Business Secretary, and would be carried out by the Trade Remedies Authority (TRA), a quango set up in 2021 following Britain’s exit from the EU.

If the TRA found evidence that Chinese subsidies had distorted the market, it could recommend trade remedies, such as extra duties or tariffs.

This scenario would mark one of the first times the agency has intervened on a major consumer product.

The public body has previously focused on imports of industrial materials such as iron and steel or commercial products like excavators, although it has also reviewed ironing boards imported from Turkey and e-bikes made in China.

A Department for Business and Trade (DBT) spokesman said: “No request for an investigation has been made to DBT, but car manufacturers should formally raise any concerns with the Trade Remedies Authority before one is considered.”

Separately, manufacturers urged ministers to consider breaking up the Treasury as part of efforts to rebuild Britain’s crumbling infrastructure.

Stephen Phipson, the boss of industry group MakeUK and a former civil servant, said flawed rules on public spending were preventing desperately needed investment in new roads, bridges, railways and other critical projects.

Speaking to gathered manufacturing executives, he said the Treasury’s current “green book” should be re-written to encourage more infrastructure spending – and that if mandarins object, the department should be split up.

The comments come after former prime minister Liz Truss also raised the prospect of major reforms to the Treasury, before her “mini-Budget” triggered market chaos and a selloff of UK government debt.

Neither the Conservatives or Labour are currently considering a shakeup of the Treasury after the election, but the department’s green book – which provides guidance to civil servants on how the economic impact of policies should be assessed – has faced persistent criticism from economists over the years.

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