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China to Suspend Higher Import Tariffs on Autos & Parts from the U.S.

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【Summary】​China’s State Council said on Sunday that the country would continue to suspend additional tariffs on U.S. vehicles and auto parts after April 1. The move was aimed at “continuing to create a good atmosphere for the ongoing trade negotiations between both sides”.

FutureCar Staff    Apr 01, 2019 3:21 PM PT
China to Suspend Higher Import Tariffs on Autos & Parts from the U.S.
Customers browse at a Buick dealership in China (Photo: Bloomberg News)

China's State Council said on Sunday that the country would continue to suspend additional tariffs on U.S. vehicles and auto parts after April 1, in a goodwill gesture following a U.S. decision to delay increasing tariffs on Chinese imports, Reuters reported.

The State Council, or cabinet, said Sunday's move was aimed at "continuing to create a good atmosphere for the ongoing trade negotiations between both sides".

In December, China said it would suspend its additional 25 percent tariffs on U.S.-made vehicles and auto parts while trade negotiations between the U.S. and China continue. The three month period expired on March 2 for the U.S., but both side agreed to extend it while trade talks continue. China previously said it would suspend the tariffs until at least April 1.

U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer were in Beijing for the first face-to-face meetings between the two sides since Trump delayed a increase in tariffs on $200 billion worth of Chinese goods.

U.S. President Donald Trump said on Friday that trade talks with China were going very well, but cautioned that he would not accept anything less than a "great deal" after top U.S. and Chinese trade officials completed two days of negotiations in Beijing.

"It is a positive reaction to the U.S. decision to delay tariff hikes and a concrete action adopted (by the Chinese side) to promote bilateral trade negotiations," the State Council said.

"We hope the U.S. can work together with China, accelerate negotiations and make concrete efforts towards the goal of terminating trade tensions."

China increases tariffs 25 percent in July 2018 from 15 to 40 percent, 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 higher tariffs hit electric automaker Tesla especially hard, as all of Tesla's vehicle are built in the U.S. at the company's Fremont, California factory. Last summer, Tesla was forced to raise the prices of its popular Model S and X in China by over $20,000  to offset the 40 percent tariff.

As a result, Tesla's vehicle sales in China sank by 70 percent last fall, highlighting how much the trade war is affecting Tesla. Tesla is in the process of building its Shanghai Gigafactory, its first overseas assembly plant. The new factory will allow the company avoid the tariffs altogether, by building cars locally.

In April 2018 China said it would remove to 50 percent limit on foreign ownership of any joint ventures between Chinese and foreign automakers that has been in place since 1994. The caps will be lifted for electric vehicle (EV) and plug-in hybrid car manufacturers as early as this year and the wider passenger car market, which includes combustion engine vehicles, will have the limits scrapped by 2022.

The trade talks will resume next week in Washington with a Chinese delegation led by Vice Premier Liu He.



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