British motorists are being warned that new car prices could soar in the near future amid a possible trade war between the US, European Union and China.
Both the US and China have taken significant action to curb imports of Chinese electric vehicles by imposing high tariffs on manufacturers operating in China.
The first escalation came in May, when President Joe Biden announced that the tariff on Chinese electric vehicles would be increased from 25 percent to 100 percent under Section 301 of the Trade Act of 1974.
He said this was necessary to secure the future of the American auto industry in response to “China’s unfair trade practices.”
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Brands with high-performance engines have to pay higher tariffs
LAND-ROVER
The European Union recently decided to increase tariffs. This affects many major car brands, which could be forced to increase prices in the near future.
It was confirmed that the tariffs would hit manufacturers such as BYD (17.4 percent), Geely (20 percent), SAIC (38.1 percent), other electric car brands that cooperated with the investigation (21 percent) and all other brands that did not help the EU (38.1 percent).
However, China is now considering imposing tariffs on manufacturers that produce their vehicles in the European Union. The Chinese brands are demanding “the toughest measures”.
The new tariffs would hit brands that produce high-performance engines and could potentially affect Jaguar Land Rover, which produces some models in Slovakia, as well as the Italian brand Ferrari.
According to the Telegraph, Beijing could impose tariffs of 25 percent on imported European petrol cars with engines of 2.5 litres and above.
ManMohan Sodhi, professor of business and supply chain management at Bayes Business School (formerly Cass), told GB News that the EU should be cautious about imposing tariffs on China.
He said: “Given the eagerness to protect the fledgling electric car industry in the US and EU, the Chinese response is quite measured and may only affect European-made luxury cars with large gasoline engines.
“Their aim is to get European carmakers to convince their governments not to blindly follow the US, given the greater dependence of EU manufacturers on China and the US presidential election, where economic rationality has currently taken a back seat.
“The EU and China have greater commonalities and the Chinese are giving their EU colleagues a boost with this step.”
There are fears that brands will have to raise prices for British, European and Chinese customers to cope with high tariffs and continue to make profits.
Tesla has already announced that its vehicles in European markets would likely result in higher costs for drivers, before urging them to invest in one of its popular electric vehicles before July 1.
With new registrations declining across Europe, car manufacturers will have to make difficult decisions if they want to raise their prices in the face of higher tariffs.
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Chinese car brands BYD, Geely and SAIC have to pay high tariffs throughout EuropeGETTYThis could have a dramatic impact on the uptake of electric vehicles in the coming years if they remain unaffordable for the majority of drivers.
Some experts are calling for additional help to be given to drivers in the form of targeted incentives, such as the now-abolished Plug-in Car Grant or grants of €4,000 (£3,382) in France.