The European Union’s proposed Industrial Accelerator Act (IAA) is drawing criticism for potentially alienating key trading partners as it seeks to shield the bloc’s industries from Chinese competition. The move comes amid growing concerns in Brussels about the flood of low-cost Chinese electric and hybrid vehicles entering European markets, exemplified by the rapid rise of Chinese car sales in the United Kingdom.
In September, Chinese automaker Chery Automobile’s budget SUV, the Jaecoo 7, surged to become Britain’s bestselling car, accounting for more than 10,000 units sold. Nearly a quarter of new cars bought in the UK last month were Chinese models, according to the Society of Motor Manufacturers and Traders, with electric and hybrid versions ranking prominently. This surge has coincided with discussions in London about imposing tariffs similar to those the EU has put in place—up to 45 percent—on Chinese-made electric vehicles to qualify for European manufacturing subsidies. Brussels is also considering restrictions on Chinese hybrids, including plug-in variants like the Jaecoo 7, potentially pressuring the UK to align with EU policies.
The IAA represents the EU’s first major industrial policy initiative in decades, moving away from longstanding neoliberal approaches. It aims to channel EU funds, public contracts, and incentives toward domestically produced goods in strategic sectors such as electric vehicles, steel, cement, and clean technologies. Additionally, the act seeks to reduce European dependency on foreign suppliers—especially from China—while imposing strict conditions on large investments in key industries originating mainly from Beijing.
However, this protectionist stance has raised concerns among EU partners and allies. Japan’s ambassador to the EU, Kazutoshi Aikawa, warned that the IAA risks penalizing companies from trusted international partners, many of which have invested heavily and integrated deeply into Europe’s industrial networks. He compared the EU’s approach to the United States’ Inflation Reduction Act under President Joe Biden, which similarly triggered diplomatic friction by favoring domestic over allied production.
Other countries, including South Korea and Turkey, have expressed frustration over EU steel restrictions targeting Chinese overcapacity but affecting their own exports. The debate within the EU also reflects diverging viewpoints among member states. Germany and others advocate for extending IAA benefits to countries with existing EU free-trade agreements, while France and some European lawmakers call for narrower geographic eligibility to preserve the policy’s focus on supporting domestic industry.
Critics argue that broad access would dilute the act’s objective by opening benefits to numerous countries outside the bloc, potentially undermining the "Made in Europe" branding. Research commissioned by the European Parliament suggests, however, that the economic impact of different scenarios would be modest. A strictly EU-only approach would increase GDP by 0.13 percent and employment by 0.11 percent, while including selected partners would yield slightly higher gains.
As the EU implements the IAA, it faces the challenge of balancing domestic industrial protection with maintaining strong trade relations and honoring international agreements. Former EU trade negotiator Ignacio Garcia Bercero emphasized caution, warning that concerns over China should not undermine free-trade agreements or alienate key partners. The UK-EU discussions over tariff alignment highlight the broader tensions as Europe navigates this shift in industrial policy amidst a complex global trading environment.