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China Will Slash Car Tariffs, Trump Says in a (Vague) Tweet

Category: Automobile,Finance

Mr. Trump targeted Chinese-made cars when he issued his first tariffs on $50 billion in Chinese-made goods, marking the opening salvo of the trade war. China retaliated by raising tariffs on American-made cars to 40 percent, compared with 15 percent on cars from everywhere else.

Still, it was far from clear that was the case, and industry experts said the president’s Twitter post seemed to leave open a variety of interpretations.

One possibility is that Mr. Trump was mistakenly referring to China’s move this summer to reduce tariffs on auto imports from everywhere to 15 percent from 25 percent. China’s retaliatory tariffs brought the rate on American-made cars up to 40 percent.

Another possibility is that a deal on cars was part of a larger agreement alluded to in vague statements the United States issued on Saturday night, when the truce was first announced. The Trump administration said China had agreed to purchase “agricultural, energy, industrial and other product from the United States.” As a practical matter, China would have to lower its tariffs on American-made goods or those purchases would be more expensive.

But that would be politically sensitive in China because the Buenos Aires accord allows the United States to keep its tariffs on $250 billion in Chinese-made goods, though Washington agreed to postpone a Jan. 1 increase in tariff rates.

If cuts in tariffs on American-made cars are in the works, the biggest beneficiaries are likely to be German. BMW and Mercedes-Benz both produce sport utility vehicles in the United States and export them all over the world, including a combined total of roughly 180,000 a year to China. That is still a tiny share of China’s auto market, which reached 24.7 million cars sold last year.

American brands in China usually have a local flavor. General Motors ships almost no American-built vehicles to China. Fiat Chrysler ships some Jeep Grand Cherokees but has a huge new factory in southern China to build most other Jeeps. Ford ships a few Lincolns but is shifting production of these models for the Chinese market to factories in China. Tesla ships electric cars to China from the United States but is preparing to build its own factory in Shanghai.

Any reduction in tariffs “is very good news for some niche products,” said Yale Zhang, the managing director of Automotive Foresight, a Shanghai consulting firm. “The international giants have already localized most of their mass production cars.”

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