China Agrees to Reduce Tariffs on U.S. Built Vehicles & Auto Parts

author: FutureCar Staff    

There has been some progress made in settling some of the trade tensions between the U.S. and China. The Trump administration announced that China has agreed to to reduce the import tariff on U.S. made vehicles and auto parts by 25 percent. The current tariff is 40 percent and will be reduced to 15 percent.

Washington still had not received official documentation of when the tariff reduction will take effect the official said, speaking on condition of anonymity to Reuters.

China's plan was communicated during a phone call between Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Tuesday morning Beijing time, the official said.

News of the move, also reported by other media outlets and automotive executives briefed on the talks, boosted automakers' shares.

U.S. President Donald Trump and Chinese President Xi Jinping agreed at a Dec. 1 meeting in Argentina to a 90 day truce in the trade war. The U.S.planned to increase of tariffs to 25 percent from the current 10 percent on another $200 billion worth of Chinese goods beginning on Jan 1. Now that has been put on hold and no other details have emerged from the meeting between the two world leaders.

The two sides are expected to negotiate over U.S. demands for stronger Chinese protections for U.S. intellectual property, an end to forced technology transfers and greater market access to China for U.S. tech companies. Lighthizer has said March 1 is a "hard deadline" for increasing U.S. tariffs on Chinese goods if no deal can be reached by then.

In a Twitter post early this morning, President Trump tweeted "Very productive conversations going on with China! Watch for some important announcements!"

White House adviser Kellyanne Conway welcomed reports of the auto tariff cut. "It's really great news, and I hope our friends in the auto industry see it that way as well," she told reporters at the White House.

China's commerce ministry said, "Both sides exchanged views on putting into effect the consensus reached by the two countries' leaders at their meeting, and pushing forward the timetable and road map for the next stage of economic and trade consultations work."

In August GM sought a tariff exemption for the Buick Envision, which is exported to China from the U.S.

In May, China agreed to cut its global auto import tariff to 15 percent from 25 percent. Two months later China reversed its stance and added on a punitive 25 percent tariff on U.S. built autos in direct response to an initial round of U.S. tariffs on $50 billion worth of Chinese goods.

That increased Beijing's total tariff rate on U.S. autos to 40 percent, greatly impacting growing U.S. exports of luxury cars and sport-utility vehicles, including those from BMW, Ford, Mercedes and Tesla, which are assembled in U.S. factories.

In July, Tesla was forced to raise prices around 20 percent in China after Beijing imposed a new 25 percent tariff on U.S. made cars to offset the high import tariffs. By November, in a bid to protect sales Tesla slashed prices of the Model S sedan and Model X SUV once again by 12 to  26 percent, as higher Chinese tariffs on U.S. autos make it more expensive to import cars.

The Wall Street Journal, citing people familiar with the issue, said Liu planned to go to Washington after the new year to resume negotiations. However, U.S. Trade Representative officials have declined to comment on plans for any new trade talks between the U.S. and China.

Liu He, a top economic adviser to President Xi, is leading the talks on the Chinese side.

In comments reported separately by China's foreign ministry, the government's top diplomat, State Councillor Wang Yi said, "If China and the United States are antagonistic, then there are no winners, and it will hurt the whole world." The United States should look at China's development in a more positive light, and constantly look to "expand the space and prospects for mutual benefit," he told a forum.

FutureCar Staff