By on December 14, 2018

China announced Friday its intent to reduce tariffs on imports of American-made cars as it tries to negotiate a trade deal with the United States. As you’ll recall, the People’s Republic imposed additional punitive tariffs on U.S. cars and auto parts earlier this year after promising it would lower the trade barriers on a global scale.

Things look to be different this time around. China has already taken steps to scale back the trade war and appears ready to continue down that path. Earlier this month, President Donald Trump and Chinese President Xi Jinping agreed to a truce in the trade war at their meeting in Argentina. This was followed by an announcement, via Trump’s Twitter account, claiming China had agreed to scale back auto tariffs against the United States

It took a while, but the Chinese Finance Ministry has now confirmed that claim, saying it will remove the additional 25 percent tariff on car imports from the United States for three months starting January 1st. During the 90-day period, the two nations will attempt to negotiate a “mutually beneficial new Sino-US trade order.”

There are reasons to remain skeptical. Trump has taken a tough stance on trade, trying to bully China away from protectionist practices that see the United States losing ground. Meanwhile, Xi pledged China would cut car tariffs last spring. While the nation delivered on its promise in July, reducing foreign automotive duties from 25 percent to 15, American-made passenger vehicles were hit with an additional 25-percent retaliatory tariff just a few days later — negatively impacting the profits of major automakers that ship cars to China from the United States.

According to Bloomberg, both Washington and Beijing are unconvinced as to whether or not China is willing to water down its plans to match and exceed U.S. industrial might. The trade war has hurt both countries, but neither wants to come out looking like the loser.

From Bloomberg:

China’s top leaders are expected to meet next week to decide economic policies for 2019. Their focus will be on how they propose to sustain stable growth when faced with both uncertainty from the trade war and from the slowing domestic economy.

The temporary tax reduction for U.S. car imports comes as China heads for its very first annual vehicle sales decline in 28 years amid the trade war and an economic slowdown that’s undermining consumption momentum.

Car sales in China have fallen for six straight months after decades of almost uninterrupted growth. While there were other factors, the tit-for-tat jabs between the world’s biggest economies have played a role. The move by China would reduce tariffs on cars made in the U.S. to 15 percent from the current 40 percent, in line with what other countries pay.

Meanwhile, the value of U.S. passenger car exports to China has fallen by roughly $2.4 billion (about 30 percent) through the first nine months of 2018. But not all manufacturers were affected equally. General Motors and a handful of other automakers already have a large presence in China via partnerships with local companies, but brands like Daimler and BMW took a beating after deciding to build their high-volume exports in the United States.

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25 Comments on “Trade War Watch: China to Temporarily Suspend U.S. Auto Tariffs...”


  • avatar
    Tstag

    If China suspends tarrifs on US imports for 3 months it effectively suspends them on imports from all countries under ‘most favoured’ nation rules. That will please EU based car makers like JLR who have taken a beating since all this started.

    • 0 avatar
      ect

      Actually, this will have no effect on tariffs applicable to vehicle imports from other countries, as these are already at 15%. Matt tries to make it sound like China imposed the 40% tariff on US-made cars out of the blue, which is not the case – he ignores the fact that the increase to 40% was part of China’s retaliation for US-imposed tariffs on a range of Chinese goods.

      A 3-month suspension of the higher tariff rate will have no impact at all. No manufacturer is going to revise its sales and production plans on the basis of a 3-month window, and I’d bet that China understands this quite well. The Chinese move is symbolic, a way of telling the world that they’re on the side of freer trade without actually doing anything meaningful – they won’t give something away without getting something in return.

      • 0 avatar
        highdesertcat

        ect, the bottom line to this current saga is that China has altered its formerly rigid stance on trade with the US and the rest of the world.

        I read an interesting piece in our local newspaper this morning which basically read that China miscalculated on Trump’s position by targeting the agriculture (soybean, etc) sector in the states that Trump won.

        The result, as any China watcher can tell you, is that there were unintended consequences for the China-economy and repercussions that will rattle on for months.

        So, maybe all this will lead to a better trade relationship for all involved since even the EU is now sternly looking at what China has demanded from their trade relationship.

        My view is that the US (and the EU if they want to) should levy the same tariffs on China-made goods imported to the US as China levies on US-made goods imported into China.

        Now, that would be fair trade. Equitable even. Isn’t that what we all want?

        This is old news. Bloomberg (Asia) broke this days ago.

        • 0 avatar
          ect

          highdesertcat, I’d be the first to say that China doesn’t play fair, and won’t.

          But tariffs aren’t the way to address this. Trump has made American farmers collateral damage in promoting basic (and declining/obsolete) industries over agriculture and advanced manufacturing – where America excels.

          Soybeans are a great example. America’s soybean farmers face disaster because their largest market has gone away. Meanwhile, according to a Reuters article in August,

          “Brazilian soybean exports to China rose to nearly 36 million tonnes in the first half of 2018, up 6 per cent from a year ago. In July, they surged 46 per cent from the same month a year earlier to 10.2 million tonnes”

          The same article reports that Brazilian have expanded soy plantings by 2 million hectares – an area the size of New Jersey – to meet Chinese demand.

          So, American soybean farmers face disaster while Brazilian farmers are making record profits. How is this a good thing for the US?

          I’ve said it before, and I’ll say it again. The theory of competitive advantage, which is one of the foundation stones of modern macroeconomics, in now 200 years old, and still valid. We’ve been proving by example since at least 1846 that tariffs kill jobs and reduce prosperity. But, we continue to faced by people who, purely for ideological reasons, don’t want to acknowledge this.

          • 0 avatar
            highdesertcat

            ect, we, the people, have two more years to see how this trade thing will shake out because that’s how long the guy in the driver’s seat in DC has left on his first term.

          • 0 avatar

            I assume many know this, but wanted to state it for those who do not. “Soybean” farmers grow a diverse crop – not just soybeans. Corn, soybeans and some 3rd crop along with livestock (occasionally) is the norm. Not all land is planted each year as this “set aside” allows the land to rest for a season which increases yield in the next season. The talk now is reducing the number of acres next year on soybeans and increasing corn acres. I am NOT saying that farmers have not been hurt by the trade thing with China. They are, for the most part, a resilient group of folks who will roll with the punches as long as they have the courage to do so.

          • 0 avatar
            Luke42

            @HDC:
            Assuming that Trump has two more years in office is “optimistic” on your part.

            Here’s a list of Trump associates who have been indicted, tried, convicted, or sentenced for crimes related to the 2016 campaign and/or accepting foreign influence:
            https://www.nytimes.com/interactive/2018/08/21/us/mueller-trump-charges.html

            Now, I’m not one to push guilt by association. But I can’t think of any 1st world CEO, politician, or organized crime leader who has survived so many of his or her close associates being tried+convicted+jailed.

            Time will tell, of course. I’ll wait.

          • 0 avatar
            highdesertcat

            Luke42, every day with President Trump in office is an adventure. To be sure, I did not vote for him in 2016 but what he has done for me and mine, and millions of other Americans, is truly remarkable.

            Made a believer out of me. Me, the guy with equal disdain for both political parties.

            It’s been said that all politics is local. But the policies of any administration is personal.

            And the policies of President Trump have really been good for me and millions of other Americans, especially baby boomers.

            If Trump is a diamond in the rough, I see it as a guy who is willing to try to get things done, a risk taker. He’s never been refined, nor a vacillating politician.

            That old saying, “It is better to have tried and failed than to never even have tried at all” is something I believe in, having been self-employed for 30 years before retirement. Trump is trying.

            So President Trump is far from perfect. This too shall pass.

            And if the worst scenario happens in accordance with the ‘crats playbook, those of us who have benefited from President Trump’s policies will just shrug our shoulders and say, “It was good while it lasted.”

            Meanwhile, back at the ranch, our financial future has been secured, our life insurances fully paid up, our annuity portfolio squirting out forced excess payments, the price of gasoline is downright cheap @$2.099/gal today…. Damn, what’s not to like?

            We will mourn the end of his reign, but it was great while it lasted.

          • 0 avatar
            bd2

            hdc –

            The Grifter-n-Chief’s policies (and that of what constitutes today’s GOP) will end up costing the boomers, but even more so Gen X and the Millenials.

      • 0 avatar
        Matt Posky

        The article specifically calls them retaliatory tariffs.

        • 0 avatar
          ect

          Not to quibble, Matt, but as a lawyer who has had considerable experience with false advertising issues, it’s not that simple.

          The opening paragraph (which most people will read, even if they skim the rest to get at the comments) says that

          “As you’ll recall, the People’s Republic imposed additional punitive tariffs on U.S. cars and auto parts earlier this year after promising it would lower the trade barriers on a global scale”

          Punitive and retaliatory are very different concepts.

          Several paragraphs later, the article acknowledges that the additional Chinese tariff was retaliatory. But by that point, how many readers have either not clicked on the jump to the full article or skipped on to the comments?

          So, to the extent I didn’t fully digest everything said in the article, I absolutely and unreservedly apologize for my oversight. But the use of the word “punitive” in the opening paragraph was at best misleading.

  • avatar
    thelaine

    The trade issue needs to be confronted. The Chinese shrugged off the pathetic rhetoric of previous administrations. I think the US finally has a president who was able to get China’s attention. Even the spineless EU is leading from behind and making bleating noises now that they have seen US resolve.

    No one can predict the outcome, but it is about time a president took the China trade issue seriously. Their actions have caused massive damage and the policymakers have been too blind, fearful or corrupt to do anything meaningful about it.

    We never should have agreed to allow this dictatorship into the WTO.

  • avatar
    carguy67

    Geez … Am I the only American who thinks the tariffs/import restrictions are trivial compared to the IP theft/hacking/spying the Chinese are doing? I really don’t care if Harbor Freight tools go up 10%; the Chinese are stealing our technology and R&D and will likely be using it against us in a naval confrontation in the not-too-distant future (of no small concern to me as my son is in Navy OCS studying Surface Warfare).

    Saying I don’t think much of Trump is a major understatement, but he gets credit for confronting the Chinese, no matter how clumsily. Since he doesn’t like to read or study and doesn’t seem to understand nuance I hope he or his minions are up to confronting China on their outright theft of our prosperity.

    • 0 avatar
      brn

      There’s at least one more.

      Screw the tariffs. They’re minor compared to the real losses. No long term vision, so they can satisfy short term stock prices. They knew exactly what they were doing and probably felt liked they’d “deal with it later”.

      Sad.

    • 0 avatar
      thelaine

      Make it one more. China is at war with us and we are the ones who are arming them. It is insane, but lots of Americans are getting rich from it and they are the ones steering the ship.

    • 0 avatar
      thelaine

      Lots of people think they are more sophisticated and studious than this president. People said the exact same thing about Reagan. Dumb actor. Racist who criticizes “welfare queens.” They said the same thing about Gerald Ford. Dumb, clumsy football player. They said the same thing about George W, dumb “decider” of “strategery.” They claimed he did not read books. The media also called them all racists, including George HW (Willie Horton!) (until he died, then they loved him, because he was dead). You may detect a pattern to this. Hint: they are all from the political party 90 percent of big media opposes.

      This president is fighting for working people. Trump, Clinton and Reagan did this. Trump is far more intelligent and has been wildly more successful in his life than almost anyone who thinks they are smarter, more cultured, and more refined than him. He is a born salesman and some sophisticates find that distasteful. In contrast, if you want to see the absolute king of bullsh*t, who built his life on a race hustle, vapid rhetoric, and a mountain of pseudo-intellectual “nuance”, look no further than his predecessor.

      • 0 avatar
        highdesertcat

        Exactly! All those qualities have made me a believer in President Trump.

        It’s been said that all politics is local. But I would like to add that any President’s Policies are personal. Personal in how they affect each and everyone one of us.

        And President Trump’s policies have affected me and mine in the best possible ways. Right where it counts. In the better quality of life.

        Come to think of it, so did President Reagan’s policies.

      • 0 avatar
        hreardon

        thelaine –

        While I agree that he media does a great job of painting conservative occupants of the White House as Neanderthals, I think we need to be honest and admit that Trump doesn’t do himself any favors. His demeanor and manners are distasteful, but at least he recognizes that geopolitical negotiations are blood sport – other countries don’t necessarily want to be our friends, they want something from us (and vice versa).

        I think Trump’s a natural salesman, but we the electorate need to be honest about that fact – and vigilant when he goes too far.

        Here’s the irony: Obama and Clinton were much better at hiding their true motives and goals under flowery rhetoric and smiles. At least with Trump, I know what I’m getting and that he’s “full of it” – there’s no pretense there. I’m oddly more comfortable with Trump’s brand of politicking than the smile-feel-good fleecing that took place under Obama and Clinton.

        • 0 avatar
          thelaine

          hreardon,

          I agree with what you wrote. It is ironic to hear the press constantly call him a LIAR! when I actually perceive him to be as candid as any president in my lifetime. He is taking on the Chinese. He is taking on illegal immigration. He has cut taxes and regulations to finally get the economy humming again. He has appointed good judges. He is constantly trying to bring jobs to working-class people.

          Trump is thin-skinned, but he ferociously fights back against the press by pointing out their hypocrisy and bias. They have responded by losing their minds. No one will ever again believe the press is non-biased. He has driven them to completely expose themselves. I love that. He also fights against politically correct cowardice, which is a worse trait than his boorishness, in my opinion. I no longer care that he is crude. It is inseparable from his personal and negotiating style. He is ALWAYS selling and negotiating. He cannot turn himself off in order to pretend to be someone else and I would not want him to.

          Trump loves his country, he knows allies from enemies, he is a fighter, and he appears to be resistant to corruption by party pressure, social pressure, or outside money. I’m not going to compare him to Lincoln. Most presidents have been mediocrities or worse. So far, Trump is the best since Reagan. That is good enough for me.

          I did not vote for Trump in 2016, but I won’t make that mistake again.

    • 0 avatar
      hreardon

      carguy67 –

      Add me to the list. We gave away our competitive advantage (technology) for the opportunity to sell into a massive market – all under the disguise that ‘free trade’ would help open China and gets its government to reform.

      I am absolutely convinced that we are headed for a hot conflict with China, and much of our IP is going to be used against us during that engagement.

      I agree that Trump is ham fisted, clumsy, and petulant, but I’m thrilled that we finally have someone who has the gumption to stand up to the Chinese government: all of Bush I, Clinton, Bush II, and Obama’s social graces and useless platitudes led the Chinese to think they could essentially walk all over us. We finally have someone in the White House saying ‘no’, and pushing back – hard.

      I’m okay with all of the bravado and bluster if it results in a more balanced agreement in the end.

      The ultimately goal here is not necessarily to repatriate factory jobs and manufacturing back to the US – it’s to remove the jobs, revenue and IP from China. If it goes to Vietnam, India, Philippines, Singapore, Latin America, or Africa – I’m a-okay with that. Move those factories to Columbia, Nicaragua, Mexico, Uruguay, heck, even Venezuela and Cuba.

      • 0 avatar
        thelaine

        Yes.

      • 0 avatar

        Yeah, but are those other nations as productive and capable as Chinese, can they manufacture with same high quality standards? Do not under-appreciate Chinese, they have thousands of years of culture and invention like rockets, paper and even soap was invented in China. Europeans looked like brutes compared to Chinese until recent few centuries. Chinese were on the wrong path, that’s why they fell behind. But now they are on the right path and watch them establish first Moon colony and first land people on the Mars while American politicians cannot make their mind. And they have no qualms stealing Western technology and West honestly does not care and even is happy about it. Eventually Chinese will innovate as they did before and West will left behind populated by snowflakes with liberal art degrees living in with and relying on their parents.

        • 0 avatar
          thelaine

          ILO,

          Totally agree with you on Western weakness, but you may be overestimating the Chinese the same way people overestimated the Japanese in the 1980’s. The Chinese are the ones who put themselves on “the wrong path,” after all. Give them some time, they may screw the pooch again. After all, they are a dictatorship. Top-down economics has a bad long-term record and people generally prefer freedom, when they can afford to believe in it. As living standards go up, so do expectations. Time will tell.

          • 0 avatar
            Art Vandelay

            Again, the longest time China has spent in space is a 30 day mission. That’s quite a leap to Lunar and Martian colonies when ISS Astronauts routinely do 12 months. We are at a point where low Earth orbit has become munda enough that NASA isn’t even bothering with it instead privatizing it.

        • 0 avatar
          Art Vandelay

          I don’t get why people consistently poopoo the US with respect to space exploration vs. China. As this is a vehicle enthusiast site. China just launched a 400 pound Rover to the dark side of the moon. (Nice, but let us not forget we put a manned Rover on the moon in 1971). Not impressed? We landed a 2000 pound Rover on the surface of Mars via a rocket crane back in 2012. Spirit and Opportunity did some little things that will have the way for manned missions like confirming the availability of water for short periods on the surface. Then there are the other missions. We are currently set to land on an asteroid and return samples (Osiris-rEX). Then there was New Horizons which flew by Pluto. And the Voyager twins still returning meaningful data from interstellar space. But all this is meaningless because, you know, China is going to replicate a feat we did in 1969 (you speak of a lunar colony when they have yet to actually go there).

          Look, what China is doing over the course of a relatively short time frame is indeed impressive. But they have yet to push the envelope in any meaningful way as the US has. Knock us for many reasons for sure, but to imply that Chinese space exploration efforts are, pardon the pun, in the same universe as the US is crazy talk. We are simply the best in this regard and it isn’t close.


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