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

Steph Willems
by Steph Willems
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]

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  • Inside Looking Out Inside Looking Out on Aug 25, 2019

    China is fxxked up and is terminally ill. We know about it and they know about it. Chinese economy is the house of cards. It's just matter of time when all that shaky construction comes downs. Capitalist economy is not compatible with communist political system. What's happening in Hong Kong is just beginning. It will spread out to the rest of country. It is similar to what happened with Warsaw pact after Solidarnost movement started in Poland. Chinese rulers think that they can wait out Trump and after Dems take power (as if) they will manipulate them like puppets. But time is not on their side, contrary to that - it is against them. Russians communists also thought they can wait out Reagan but system crumbled down much sooner.

  • Jeff S Jeff S on Aug 26, 2019

    China will wait it out regardless if they are Communist or not. China is not like Russia or even the West. The Chinese do not have the same concept of time as we have they were in isolation from the rest of the World for centuries by choice. As for Hong Kong it is likely that the Chinese will bring in the military to squash the rebellion. Our only chance with China is to not alienate our allies and together as a united force we negotiate with the Chinese on theft of intellectual property and on Hong Kong but do it in such a way that it gives China a way to save face. China will walk away from any negotiations if they feel they are shamed. Verbal and tweet attacks will not bring China to negotiations.

    • HotPotato HotPotato on Aug 28, 2019

      100% correct. A journalist asked an exiled democracy protester shortly after the Tienanmen Square massacre if he was discouraged. "No," he said, "I think democracy will come to China." When? asked the interviewer. "Very soon," he replied brightly, "maybe 100 years." Their time horizon isn't ours. They're playing the long game. If they must, they can wait out this president, and the next, and the next. And yes: with an economy that large and growing larger, it will take a united multilateral front standing against their unfair practices, not just a single country with a mercurial leader who destroys his own international alliances. And yes: they must be able to save face, not bow down to some narcissist who must be told he's won or it's no deal. Too many painful colonial memories to do it any other way. 100% correct.

  • Jerry Hightower I'd like to see a true hardtop.
  • Jerry Hightower I'd like to see a true hardtop
  • 28-Cars-Later "Six-thousand dollars get you in the door."You just cost me six thousand dollars! And one Cadillac.
  • 28-Cars-Later Kudos to the Mazda team on the attractive front end, though the lack of front bumper is still detention after class. Rest of it is also visually appealing, its shocking me how good this looks and how bad Honda (and to an extent Toyota's) styling is in comparison.
  • Slyons My guess is they keep the 2.0 liter they have now with minor tweaks, and shoehorn in the 48V mild hybrid system that just debuted in the CX-90. Should allow for all the regular fun of wringing out the 4 cyl and bump the fuel mileage up at least a couple points. I don't think we'll see a major evolution of the drivetrain until the next next model (NF?).