China May Cut Tariffs on Imported US Cars to Below Pre-Trade Dispute Levels
Zhang Yushuo
/SOURCE : yicai
China May Cut Tariffs on Imported US Cars to Below Pre-Trade Dispute Levels

 

(Yicai Global) Dec. 4 -- China could reduce import tariffs on cars from the United States to less than what they were before their trade dispute resulted in additional duties on billions of dollars of goods, according to experts.

It will take some time to achieve a consensus, including in the government, automotive industry experts told Securities Daily, adding that rates could fall to less than 15 percent as early as the end of this year.

News of the cuts broke in China yesterday in a tweet by US President Donald Trump, a day after he met with his Chinese counterpart, Xi Jinping. "China has agreed to reduce and remove tariffs on cars coming into China from the U.S.," Trump wrote. "Currently the tariff is 40%."

China, the world's largest auto market, levied a 25 percent rate on American cars until July 1, when it cut the tariff to 15 percent. That lasted less than a week. On July 6, it added 25 percent to the new rate in response to a first wave of US tariff hikes on Chinese imports.

In total, the US has slapped an additional 10 percent on USD250 billion worth of Chinese goods this year. China responded with similar tariffs on USD110 billion worth of American products.

Trump had planned to increase the rate to 25 percent at the start of 2019. But after meeting Xi at the G20 summit in Buenos Aires, he agreed to postpone for 90 days so the countries could try to work out a deal, which likely includes China buying US agricultural, industrial and energy products.

Fierce Competition

Competition in China's auto sector is becoming increasingly fierce, one of the experts who spoke to Securities Daily said, adding that the increasing quality of locally made cars is undermining the advantage American firms have enjoyed.

The trade dispute will also cool Chinese enthusiasm for American cars, he said, but noted that the biggest problem for US automakers is that their cars, business strategies and product launch cycles do not fit China's market.

China imported USD51 billion worth of cars last year, with just under a quarter coming from North America, according to the China Passenger Car Association. Car and light truck imports from the US totaled USD9.5 billion, or about 280,200 vehicles, 10 percent of the total number of units imported.

That number has tailed off in the second half of this year due to the increased tariffs, allowing European and Japanese marques to edge up their market share in China.

Sales at Ford's Chinese joint venture fell 48.3 percent through October from a year earlier, while Fiat Chrysler's dipped 36.3 percent. Tesla's sales dropped 37 percent to just 3,169 in the third quarter. It sold just 211 cars in October, down 70 percent on the year.

Editor: James Boynton

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Keywords: Tariffs