The European Union is rapidly developing a strategy to address the impending tariffs on electric cars traded with the United Kingdom. With just a little over a month remaining until the duties are due to take effect, EU member states have urged the bloc to propose solutions, including a potential postponement of the 10% tariff. France, the only major member state initially opposed to a complete delay, has now indicated a possible way forward.
Maros Sefcovic, the EU's executive vice president, along with EU ministers, recently discussed the issue. France expressed its willingness to find a solution to soften the impact, suggesting the idea of a short transition period. This is a positive step, given that European car manufacturers, such as Volkswagen and Renault, have estimated that the tariffs, effective from January 1, 2021, could cost the sector €4.3 billion ($4.5 billion) over the next three years.
However, finding a viable solution will not be easy. The challenge lies in making necessary changes without revisiting the Brexit deal, according to sources familiar with the matter. The current post-Brexit arrangements state that electric vehicles moving between the UK and the EU will be subject to the tariff if less than 45% of their value originates from the region. This policy aims to stimulate the development of Europe's battery supply chain. European carmakers are pushing for a three-year extension of the planned phase-in period as the local cell supply is not yet prepared.
During last week's meeting, nearly every member state that participated, including Italy, Sweden, and Hungary, expressed support for a one-time extension of the current rules. The UK also advocates for a postponement until 2027. France indicated its openness to a solution that would safeguard European manufacturers from the impact of tariffs and provide a short transition period. However, France emphasized that reopening the post-Brexit trade deal should be avoided and argued that European production would soon be capable of meeting export demands to the UK.
Achieving a balanced and unified position will undoubtedly be a challenging task. The agreement reached must protect European car manufacturers, ensure the continued development of the continent's battery sector, and avoid setting a precedent for reopening other aspects of the post-Brexit arrangements.
Earlier reports suggested that one option under consideration was a potential delay of up to two years in the implementation of new tariffs.
It should be noted that any solution requiring modifications to the EU-UK Trade and Cooperation Agreement, or TCA, will require the approval of member states followed by a decision with Britain. The EU is now under pressure to expedite the development of its strategy to mitigate the impact of these tariffs on the electric car trade with the UK.