Trump Tweets that China Will Cut Import Tariffs on U.S. Built Cars

Trump Tweets that China Will Cut Import Tariffs on U.S. Built Cars

Author: FutureCar Staff    

U.S. President Donald Trump said China has agreed to cut import tariffs on American-made cars. At a dinner on Saturday at the G20 summit in Argentina, Trump and Chinese President Xi Jinping agreed to halt new tariffs, following months of growing tensions on trade and other issues.

Trump said that the U.S. and China have agreed to a 90-day cease-fire in the ongoing trade war with China. In a Twitter post, Trump wrote that "China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%".

President Trump called it an "incredible deal".

Trump agreed to postpone an increase in the tariff rate on $200 billion worth of Chinese imports to 25 percent from 10 percent that was scheduled to begin Jan. 1.

The two sides also agreed to negotiate in the next three months over "structural changes" to China's policies on technology transfers, intellectual property protection, non-tariff barriers, cyber intrusions and theft, services and agriculture.

China Raised Tariffs on Auto Imports in July

China raised the tariffs on U.S.-made cars to 40 percent in July, as part of a larger package of retaliatory tariffs amid the escalating trade war between Washington and Beijing. The move forced many carmakers to raise prices in a major hit to the roughly $10 billion worth of passenger vehicles the United States sent to China last year.

The news of the cooling tensions with China sent shares of German automakers BMW and Daimler AG higher. Both companies manufacture vehicles in the United States for export to China, the world's biggest auto market.

BMW's Spartanburg assembly plant in South Carolina produces the BMW X3, X5, X6 and other models. Earlier this year, BMW announced that it exported 272,346 BMW X models from the Spartanburg plant during 2017, with an export value of approximately $8.76 billion, according to data from the U.S. Department of Commerce.  Many of these vehicles were exported to China.

Shares of Chinese car dealers also pushed upwards on hopes that such a move could revitalize China's sluggish domestic auto market that is poised for its first annual sales decline in decades amid slowing economic growth and the U.S.-China trade war.

"If they cancel the extra 25 percent tariff on U.S.-made cars, then we will see positive signs for imported cars," Wang Cun, director of the China Automobile Dealers Association's import committee, told reporters in Beijing.


A BMW X6 on the assembly line at the automaker's Spartanburg asembly plant in South Carolina.

Tariffs Hurting Tesla's Sales in China

That move hit electric automaker Tesla especially hard, as all of Tesla's vehicle are built in the U.S. at its Fremont, California factory. In China, Tesla was forced to raise the prices of its vehicles to offset the 40 percent tariff. In July, Tesla increased the price of the popular Model S and X in China by over $20,000.

As a result, Tesla's vehicle sales in China sank by 70 percent last month from a year ago, the country's passenger car association told Reuters last week, highlighting how much the trade war is affecting Tesla. Tesla is also building a local plant in Shanghai where it plans to build the new Model 3 to help it avoid steep import tariffs.

No Comments from Government Officials Yet

When contacted by Reuters, the White House and U.S. Trade Representative's (USTR) office did not immediately respond to a request for comment late on Sunday. China's commerce and finance ministries did not respond to requests for comment on Monday.

Major U.S. automakers said they were unaware of the lower tariffs on exports to China.

The automakers have a previously scheduled meeting with USTR on Monday, two people briefed on the matter told Reuters.

The United States currently charges tariffs of 27.5 percent on Chinese vehicles. Last week, U.S. Trade Representative Robert Lighthizer said Trump had directed him to examine all available tools to raise U.S. tariffs on Chinese vehicles to the level that China is charging.

Now it looks as though that won't happen—at least for 90 days.

FutureCar Staff
FutureCar Staff
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