The UK aims to secure deals with the EU on steel and electric vehicles to strengthen post-Brexit economic ties. This move comes amid economic uncertainty and upcoming trade rule changes that could disadvantage British industry.
Key points
UK seeks EU deals on steel and electric vehicles
Aim to strengthen post-Brexit economic ties
New EU steel tariffs effective July 1
UK to cut tariff-free steel quotas by 60%
50% tariff on steel imports above quota limit
Mentioned in this story
EUUK
Downing Street hopes to secure deals on steel and electric cars with the EU as it seeks to upgrade the post-Brexit economic relationship.
Amid economic uncertainty caused by the conflict in the Middle East and strains in relations with the US, Keir Starmer is seeking closer economic ties with the EU.
The UK wants agreements on steel and electric vehicles to avoid British industry being disadvantaged by scheduled changes to trade rules.
The EU this week agreed trade restrictions on steel imports in response to a glut of artificially cheap Chinese imports that have depressed global prices. The UK, which is one of the EU’s biggest markets, is not the target, but will be hurt by the higher tariffs, which come into force on 1 July.
The UK had already announced protection for domestic steel earlier this month: it will slash quotas for tariff-free steel by 60% and impose a 50% tariff on imports above that level from 1 July.
Separately, stricter trade rules for electric cars are due to come into force in 2027.
The Cabinet Office minister, Nick Thomas-Symonds, told reporters in Brussels this week that steel and EVs “have to be a matter of discussion this year” because of the context.
“Even if there was no wider reset discussion going on, steel at this moment would be something as a matter of discussion,” he said. “There is a similar situation on rules of origin in the automotive sector,” he added, citing the high value of car batteries as the problem.
In 2023, UK and EU carmakers were given three years to meet more demanding local-content requirements. To qualify for zero tariffs under the EU-UK trade and cooperation agreement, car manufacturers have to prove that 40% of the value of an EV is comprised of parts made in the EU and the UK.
A move to a higher local-content requirement was delayed until 2027, after industry requests, as limited battery production meant EU and UK producers would struggle to meet the criteria. The battery can account for up to 50% of the value of an EV.
Thomas-Symonds declined to name specific sectors where the government is seeking to align with the EU, citing the negotiating process and a wish not to disclose market-sensitive information. He said he would take a “ruthlessly pragmatic approach” that would assess “where it is our national interest to align”.
Q&A
What trade deals is the UK seeking with the EU?
The UK is seeking agreements on steel and electric vehicles to enhance its economic relationship with the EU.
How will new EU steel tariffs affect the UK?
The new EU steel tariffs, effective from July 1, will not target the UK directly but will increase costs for British steel exports.
What are the scheduled changes to UK trade rules?
The UK plans to cut tariff-free steel quotas by 60% and impose a 50% tariff on imports exceeding that limit starting July 1.
Why is the UK focusing on closer ties with the EU now?
The UK is pursuing closer ties with the EU due to economic uncertainty from the Middle East conflict and strained relations with the US.
The EU commissioner in charge of UK relations, Maroš Šefčovič, told the EU-UK Forum conference this week “we have taken good note of the UK’s desire to work on closer alignment with the EU and are exploring what can be done”. A commission spokesperson declined to elaborate.
The EU and UK will hold a summit in the summer with the aim of finalising agreements on food and drink, youth mobility and energy. But the agenda for deepening economic ties beyond those issues has not yet been set out.
David Henig, the director of the UK Trade Policy Project, said the two sides were having an “unstructured” conversation about the future economic relationship that was hampered by “struggling” talks on a youth mobility deal.
Henig suggested a deeper economic relationship could be constructed under the banner of economic security, in response to Donald Trump’s tariffs and Chinese competition. “It could be a helpful one that allows you to tackle a few issues in a way that didn’t reopen some of the awkward old things,” he said, referring to Brexit red lines.
Nearly a decade after the EU referendum of 2016, some prominent EU voices argue it is time to move beyond the Brexit years.
The president of the European parliament, Roberta Metsola, said both sides had a “strategic imperative” to reset the relationship, calling for a bespoke approach to UK relations. “We need to be talking about a uniquely ‘British’ model,” she said, describing the UK as “not any other third country” but a former EU member that “needs to be treated as such”.
British officials are encouraged that Šefčovič opened the door to a steel agreement. Last month Šefčovič, who oversees EU trade policy, called for a western steel alliance that included the US and UK in response to Chinese overcapacity.
But the commission is prioritising steel talks with the US rather than the UK. No agreement with either is expected before higher steel tariffs take effect on 1 July.
On EVs, a commission spokesperson said there was no change to the 2023 decision: “In other words, the current rules of origin for electric vehicles and batteries are due to expire on 31 December 2026. Further discussions on these and related topics can take place within the framework of ongoing EU-UK negotiations.”
Mike Hawes, the chief executive of the Society for Motor Manufacturers and Traders, said the looming changes to rules of origin threatened €80bn a year in automotive trade between the EU and UK. Industrial capacity, especially for batteries and their components, was “insufficient, despite significant investment” he said.
“Both sides must seek a solution that avoids the imposition of self-defeating tariffs – which means additional cost – on the very vehicles government and industry want consumers to buy.”
