Automakers Sweating After China Announces 25-percent Tariff on U.S. Autos

The trade war between the United States and China heated up again Friday, with the People’s Republic pulling a U-turn on its treatment of U.S.-built vehicles. Come mid-December, China will hit inbound U.S. vehicles with a 25-percent tariff. Auto parts will see a 5-percent tariff.

The new — well, resurrected — auto tariffs are a reactionary measure, coming after U.S. President Donald Trump proposed, then delayed, the levying of a 10-percent tariff on $300 billion of Chinese goods. While some import taxes will hit in September, the full range of tariffs is expected to come into effect on December 15th. China’s auto tariffs, first levied last year and lifted earlier this year as an olive branch gesture, are part of a larger raft of tariffs impacting $75 billion of U.S. goods. A 5- to 10-percent tariff hits non-auto U.S. goods on September 1st.

It’s no wonder every automaker wants to build Chinese-market vehicles within that country’s borders.

In announcing the looming tariffs, China’s Finance Ministry stated that Trump’s trade threats were “seriously threatening the multilateral trading system.”

“China was forced to take countermeasures,” it added.

China’s tariff relaxation saw the country’s original 15-percent tariff remain in place as the two countries pursued trade negotiations. A July meeting between both sides didn’t bear much in the way of fruit. Still, talks are apparently still on track to resume in September, according to the White House.

While automakers like General Motors and Ford do big business in the now-rocky Chinese marketplace, many of those vehicles roll out of joint-venture assembly plants in China. (Ford plans to up its presence in that market with more locally built Lincolns.) Foreign automakers with a large manufacturing footprint in the U.S. stand to bear the brunt of the proposed tariffs, and this morning their stocks reflected it.

BMW’s stock sank more than 2 percent in Friday trading as the news hit, while Daimler AG took a similar hit before rebounding slightly. As Bloomberg notes, data from LMC Automotive shows that six of the U.S.’s top 10 auto exports hail from those two companies. Tesla, which is currently in the process of building an assembly plant in Shanghai while funnelling cars to Chinese customers via California, saw its stock fall more than 2 percent.

Trump seemed unfazed by China’s actions, taking to Twitter to rail against the country’s economic influence in a series of messages we’ll post in sequence here:

“Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far..

“..better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP. Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..your companies HOME and making your products in the USA. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States. Also, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Office, to SEARCH FOR & REFUSE,….

“…all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Xi said this would stop – it didn’t. Our Economy, because of our gains in the last 2 1/2 years, is MUCH larger than that of China. We will keep it that way!”

[Sources: MarketWatch, BBC]