Cars

China Retaliates Over Trump Tariffs With 25% Import Auto Duty

China’s Ministry of Commerce announced today they will impose new tariffs on $75 billion of US goods to counter President Trump’s planned levies on Chinese imports. Besides the 5% tariff on American soybeans and crude-oil imports, the killer for American car manufacturers will be a 25% tariff on US cars starting December 15. 

The announced duties are similar to the Trump tariffs of 10% on almost $300 billion Chinese products that are also to take effect at the end of the year.

First Tariffs Waived

China announced a 25% duty on vehicles earlier, but then waived it as a goodwill measure in the hopes of restarting trade talks with the US. If they follow through this will affect certain manufacturers more than others, and some of those manufacturers are not American companies but rather foreign companies that manufacture various vehicles here in the US. 

Some of the most vulnerable manufacturers are Ford Motor Co., Jeep, Lexus, Tesla, Mercedes and BMW. Besides these companies there are many more who also manufacture vehicles in the US. Six of the top 10 US-made imports to China are from BMW and Mercedes, so if the tariffs actually start they will have global repercussions.

US-Made Imports Dropped 35%

Last year US-made vehicles imported into China fell 35% from 2017 to 190,118 according to Sinomach Auto, which is the country’s major auto importer. Last year BMW imported 44,800 American-made X5 SUVs into China, with Mercedes sending 40,800 of their American made GLE SUVs there.

“We encourage the US and China to find a near-term resolution on remaining issues through continued negotiations,” Ford Motor Co. said in a statement. “It is essential for these two important economies to work together to advance balanced and fair trade.” Ford exported over 16,000 Lincoln MKC and 13,000 Explorers to China last year.

Today US stock market futures dropped as did treasury yields and oil prices. China said earlier this week they would retaliate if any of the Trump tariffs continued. With the stock market see-sawing and turbulence globally Trump has delayed some of his announced tariffs. When he initiated his 10% tariffs earlier this month China stopped all US agriculture purchases. They also weakened the yuan.

Chinese Meeting In Washington DC

The September deadline may be a prod to help achieve successful negotiations for the planned face-to-face meeting in Washington DC in September with a special delegation from China. Trump’s economic adviser Larry Kudlow stated today, “Hopefully we are still planning on having the Chinese team come here to Washington DC to continue the negotiations. I don’t want to predict but we will see.”

Negotiations have been ongoing by phone since the beginning of August, though this latest announcement puts those calls into question. With the shaky markets and worries for growth in the global economy this latest news will surely heighten concerns for a major downturn in US-produced products. 

Tesla is currently building a manufacturing facility in China, but won’t start production until the end of 2019 at the earliest. They exported over 10,000 Model X sedans into China last year. Jeep also exports a similar amount of their Grand Cherokee SUVs.