Trump tweets China to cut tax on US-made cars, revs stocks
WASHINGTON/SHANGHAI (Reuters) – US President Donald Trump said China has agreed to cut import tariffs on American-made cars, buoying shares in BMW and Daimler AG who manufacture in the United States for export to the world’s biggest auto market.
Shares of Chinese car dealers also perked up in hopes that such a move could revitalize the domestic auto market, which is poised for its first annual sales contraction in decades, amid cooling economic growth and a debilitating US-China trade war.
Trump, fresh from agreeing to a 90-day ceasefire in his trade war with China at the meeting of the G20, said on Twitter “China has agreed to reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40%.”
The move, if realized, would bolster US car makers, who were hit hard when China ramped up levies on US-made cars in July as part of a broad package of retaliatory tariffs, amid the sprawling trade war between Washington and Beijing.
“If they cancel the extra 25% tariff on US-made cars, then we will see positive signs for imported cars,” Wang Cun, director of the China Automobile Dealers Association’s import committee, told reporters in Beijing.
Beijing raised tariffs on US auto imports to 40% in July, forcing many car makers to hike prices in a major hit to the roughly $10 billion worth of passenger vehicles that the US sent to China last year.
That put US-made car brands like Tesla Inc and Ford Motor Co’s Lincoln at a major disadvantage, as the move came soon after China slashed auto import tariffs for the wider market to 15% from 25%.
Trump’s tweet did not provide any further details about the tariff cuts. The White House and US Trade Representative’s (USTR) office did not immediately respond to a request for comment late on Sunday. China’s commerce and finance ministries did not respond to requests for comment on Monday either.
In early European trading on Monday, shares in Germany’s BMW, Volkswagen ASG and Mercedes-Benz parent Daimler rose between 4-7%. In China, listed car dealers such as Grand Automotive , Pangda Automobile Trade and Sinomach Automobile climbed on the news, with some local car makers falling back.
Trump and Chinese President Xi Jinping agreed to halt new tariffs during talks in Argentina on Saturday, following months of escalating tensions on trade and other issues.
After a two-and-a-half hour dinner with Xi on Saturday in Buenos Aires, Trump agreed to postpone an increase in the tariff rate on $200 billion worth of Chinese imports to 25% from 10% that was scheduled to be enacted on January 1. China agreed to resume purchases of some US farm and energy commodities.
The two sides agreed to negotiate during the next 90 days over “structural changes” to China’s policies on technology transfers, intellectual property protection, non-tariff barriers, cyber intrusions and theft, services and agriculture.
Major US automakers have said they were unaware of the lower tariffs on exports to China. The automakers have a previously scheduled meeting with USTR on Monday, two people briefed on the matter said.
The lower tariffs would be a boost to automakers exporting vehicles to China, including Ford and German car maker BMW, which export US-built luxury vehicles to China. It is also good news for Tesla that has been hit hard by increased tariffs on the electric cars it imports to China.
The US firm, led by billionaire Elon Musk, has said it will cut prices to make its cars “more affordable” and absorb more of the hit from the tariffs. Tesla is also building a local plant in Shanghai to help it avoid steep tariffs.
The US currently charges tariffs of 27.5% on Chinese vehicles. On Wednesday, US Trade Representative Robert Lighthizer said he will examine all available tools to raise US tariffs on Chinese vehicles to match the level China is charging.