China Agrees to Back Off 40 Percent Auto Tariffs on U.S.-Built Cars – Trade War Cooling? [News]

According to a White House official, China will formally announce plans to reduce the 40 percent tariff on U.S.-made cars to 15 percent in the near future.

2019 BMW X7
U.S. built cars like the BMW X7 will likely see a boon in China if tariffs are reduced, as recent reports suggest they will be. [Photo: BMW]

The U.S. and Chinese governments have agreed to a 90-day cease fire on retaliatory tariffs.

In a move preceding future trade talks with Washington, China has agreed to cut 40 percent automotive tariffs that have been in place since July. Liu He, the country’s top economic official, informed U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer of the move in a Monday phone call, according to the Wall Street Journal. A Trump administration official confirmed the move under condition of anonymity on Tuesday. Some see the move as a de-escalation of the ongoing trade war, and a stepping stone toward further economic talks between the two countries set to take place in January.

As it stands, Trump administration officials believe China will reinstate 15 percent tariffs on cars imported from the U.S. The country had lowered tariffs from 25 percent to 15 percent on July 1, but raised them to 40 percent as a retaliatory measure against additional U.S. tariffs. At any rate, lower tariffs is a positive move for automakers looking to expand in China. However, we don’t have exact details at the moment as to when any lower tariffs will go into effect. According to Nikkei Asian Review, China’s cabinet will look at reducing the duty “soon”.

If the move does go forward, it will be a boon to U.S. automakers operating in China. Lincoln, for example, aims to expand in the Chinese market. Jeep and Cadillac have also banked on higher sales in China to drive their growth. BMW’s larger SUVs, like the upcoming X7 on sale next year, are built at the company’s Spartanburg, South Carolina plant. If tariffs do drop, BMW will likely see an upswing in demand from Chinese customers.

U.S. turns up the heat on China

President Donald Trump took to Twitter to announce that “productive conversations” were going on with China. Despite the positive tariff news, Financial Times and Nikkei report the U.S. is stepping up pressure against Beijing. That includes declassifying information taking the Chinese government to task for alleged economic espionage. A Washington Post report suggests the Trump administration is planning a series of actions to call out China this week. Last week’s arrest of Huawei executive Meng Wanzhou in Canada for allegedly violating U.S. sanctions against Iran also make negotiations more fragile.

White House officials are still waiting on official details and formal documentation from China. While they believe China will in fact lower tariffs, we’ll have to wait and see. We’ll provide more information on timing and future automotive tariff news as it becomes available.