China to cut tariffs on US vehicle imports

The Chinese government says it will suspend additional duties of 25% on US-made vehicles and automotive parts for three months starting January 1, amid signs China and the United States are de-escalating their trade dispute.

“This is a good signal that [they] are on track to solve the trade war,” Wang Cun, director of the China Automobile Dealers Association’s import committee was quoted as saying by Reuters news agency.

The tariff suspension would bring China’s car imports from the US back to previous levels, after they declined 30% in the first ten months of this year, he added.

Noting that Ford Motor Company shipped nearly 50,000 US-built vehicles to China in 2017, Joe Hinrichs, president of the US carmaker’s Americas unit, said: “As a leading exporter of vehicles from the US, we are very encouraged by China’s announcement … We applaud both governments for working together constructively to reduce trade barriers and [to] open markets.”

Tesla and Mercedes-Benz said they would cut prices on their models sold in China, following Beijing’s announcement. BMW said it is now in talks with partners in China on how to respond. The country is an important market for the company’s largest exporting factory at Spartanburg, South Carolina.

China imported 280,208 US-built vehicles last year and exported 53,300 to the US market, according to a Chinese government-affiliated think tank, the China Automotive Technology and Research Centre.

Beijing is suspending an extra 25% duty on 144 US vehicle and automotive part items and a 5% levy on 67 automotive items between January 1 and March 31. China’s standard import tariff for vehicles is 15%.

Though China-US vehicle trade is relatively small compared to their domestic markets – annual sales of around 29m (China) and 17m (US) – the Chinese move on automotive-related tariffs is seen as a bargaining chip ahead of planned trade talks between the countries.

The announcement also follows the first major purchase of US-grown soybeans – another major bellwether in trade disputes – since Presidents Xi Jinping and Donald Trump held bilateral talks at the G20 summit in Argentina on December 1. Washington agreed to delay a planned increase in tariffs on $200 billion worth of Chinese goods while the countries negotiate a trade deal.

In reaction to China’s automotive tariff suspension, President Trump tweeted: “China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended US Tariff Hikes. US is doing very well. China wants to make a big and very comprehensive deal. It could happen, and rather soon!”

18 December 2018 | Steve Garnsey | Automotive Logistics

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