UK carmakers caught between Chinese competition and European trade

Britain’s car industry is facing a difficult choice: protect itself from growing Chinese competition or preserve its access to the European market. Chinese brands such as BYD, Omoda and Jaecoo have increased their share of UK new-car sales to 12%, helping make cars more affordable and boosting demand for electric vehicles. However, the EU is considering “Made in Europe” rules that could disadvantage British manufacturers unless the UK introduces tariffs on Chinese vehicles. With 58% of UK car exports going to the EU but only about 4% to China, the government faces a tricky trade-off.

UK car industry faces ‘difficult trade-off’ between Chinese and EU markets | Automotive industry | The Guardian

1. Explain why increased competition from Chinese car manufacturers could increase consumer surplus in the UK.

2. Discuss the impact of a tariff on Chinese car imports on UK car manufacturers. Use a tariff diagram in your answer.

3. Discuss whether the UK government should impose tariffs on Chinese cars.