U.S. to Hit Chinese-built Vehicles With 25 Percent Tariff; China Fires Back

Just in time for the weekend, an escalation in the ongoing trade wars has seen the Trump administration announce a 25 percent tariff on $50 billion worth of goods imported from China. These tariffs include automobiles. For its part, China retaliated by applying a further 25 percent tariff on a similar amount of American goods, including automobiles.

The move comes less than a month after China announced a plan that would lower import duties and eventually allow foreign automakers to set up shop without a joint Chinese partner. Of course, that was then, and this is now.

Both sets of duties will come into effect on July 6th, with the Office of the United States’ Trade Representative publishing a long list of products impacted by the new tariffs. Initially, the 25 percent tariff will only apply to $34 billion worth of goods, most of them industrial in nature. The remaining $16 billion, which appeared on a list released in April (later revised), will become the subject of consultations, including public hearings.

Bloomberg reports that the price of a Buick Envision, a model solely sourced from China, would rise $8,000 after July 6th. Last year, just over 58,000 vehicles entered the U.S. from that country.

China’s sticking to the same schedule as Trump on this, as well as to the dollar amounts. After jacking levies on $34 billion in U.S. goods (the list includes agricultural products and seafood, in addition to automobiles), the country will hold off on the remaining $16 billion until a later date. No doubt, it’s waiting to see what the White House decides.

Under China’s previous plan, issued in response to Trump’s threat to do exactly this, China would have lowered the import duty on U.S. automobiles from 25 to 15 percent on July 1st while cutting its tariff on imported auto parts to a flat 6 percent. The U.S. already levies an import fee of 2.5 percent on all overseas automobiles, with the exception of light trucks. Since the Johnson administration, the “chicken tax” (a 25 percent tariff) has kept cool compact trucks away from our shores.

According to the New York Times, a senior administration official said companies would be able to apply for exemptions from the tariffs, assuming they cannot source products or materials from anywhere else.

Critics of Trump’s plan include the U.S. Chamber of Commerce and the National Retail Association, though certain lawmakers, including Senate Minority Leader Chuck Schumer and Senator Marco Rubio, said the action against China was A-OK. What worries many observers, especially those in the auto industry, is that the Chinese tariffs are a prelude to a 25 percent import fee on all inbound vehicles — including those from Japan, Europe, and Canada.

[Image: GM China]