China to Cut Tariffs on Imported U.S.-Made Automobiles

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The issue of automotive tariffs has often been cited by President Donald Trump and others in his administration when framing the the U.S.’s trade relationship with other countries.

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Earlier this month, on the heels of the Group of 20 (G20) summit meeting in Argentina — during which Trump and Chinese President Xi Jinping met for a working dinner on trade — Trump said China would “reduce and remove” its 40% tariff on imported U.S.-made automobiles.

Following the G20 summit, the Alliance of Automobile Manufacturers expressed optimism about a then-potential decrease in China’s tariff rate on U.S. automobiles entering the world’s largest automotive market.

“Tariffs are a direct hit to the wallets of consumers, so taking more time to achieve a U.S.-China agreement is good news and shows movement in the right direction,” the industry group said in a release. “We appreciate the Administration’s efforts to de-escalate trade tensions with China, and we look forward to reviewing the details. Ultimately, consumers, auto workers and the auto sector win when trade barriers are lowered.”

Fast forward to late last week: China’s Ministry of Finance announced it would temporarily reduce its tariff on U.S. automobiles from 40% to 15%, according to Reuters, beginning Jan. 1, 2019.

Just before the G20 summit, United States Trade Representative Robert Lighthizer released a statement on China’s automotive tariffs.

“As the President has repeatedly noted, China’s aggressive, State-directed industrial policies are causing severe harm to U.S. workers and manufacturers,” Lighthizer said. “We are continuing to raise these issues with China. As of yet, China has not come to the table with proposals for meaningful reform.

“China’s policies are especially egregious with respect to automobile tariffs. Currently, China imposes a tariff of 40 percent on U.S. automobiles. This is more than double the rate of 15 percent that China imposes on its other trading partners, and approximately one and a half times higher than the 27.5 percent tariff that the United States currently applies to Chinese-produced automobiles. At the President’s direction, I will examine all available tools to equalize the tariffs applied to automobiles.”

U.S. automaker Ford Motor Co. applauded China’s announcement of a reduction in the tariff on imported U.S. automobiles, which, at least for now, marks a de-escalation of trade tensions that have intensified between the two countries this year.

“As a leading exporter of vehicles from the U.S., we are very encouraged by China’s announcement today to reduce tariffs on U.S. produced vehicles to 15 percent,” said Joe Hinrichs, Ford’s executive vice president and president of Global Operations. “We applaud both governments for working together constructively to reduce trade barriers and open markets. Last year, Ford exported nearly 50,000 U.S. built vehicles to support the growing auto market in China.”

China’s 2017 imports increased 16.8% from the previous year, reaching 1.21 million automobiles. Meanwhile, total automotive sales in China hit 28,879,000 units in 2017, according to the China Association of Automobile Manufacturers, making imports less than 5% of the market.

In its recent November sales report, Ford touted the importance of the Chinese market.

“China is absolutely essential to Ford globally,” said Anning Chen, president and CEO of Ford Greater China. “The management team of Ford China is focusing on our China Turnaround Plan. We are building a robust management team and efficient organizational structure to drive the business forward.

“To win against the competition in China, we must better understand the Chinese customer, respond to market changes quickly, introduce more products that customers like and want, streamline the organization, improve the capability of our team, speed up decision-making, and strengthen our relationships with dealers.”

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Ford’s Lincoln brand has made gains in 2018, with sales up 3% year over year through the first 11 months of the year. However, Ford’s overall sales in China in the year to date are down 34% compared with the January-November 2017 period.

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