China to temporarily cut extra tariff on U.S.-made cars & light trucks

According to an announcement from China’s Ministry of Finance on Friday, the country will temporarily remove additional 25 per cent tariff on U.S.-made light vehicles and auto parts starting Jan. 1, 2019 for a period of 90 days.

The announcement was a follow up on the truce in the trade war between the world's two largest economies agreed upon in Argentina. The Ministry of Finance also said in the statement that the decision would speed up the negotiations to remove all additional tariffs on each other's goods. 

U.S. President Donald Trump welcomed the announcement in a Twitter statement:

"China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended U.S. Tariff Hikes."

"This is a good signal that China and the United States are on track to solve the trade war," said Wang Cun, director of the China Automobile Dealers Association's import committee.

Wang said that China’s import of cars from the United States had seen a 30 per cent drop in volume in the first 10 months of 2018 and he expected the tariff cut to boost the volume again. 

Tesla announced price cuts on the Model S and Model X in China after the announcement. Ford Motor Co, which exported about 50,000 U.S.-built vehicles to China in 2017, also welcomed the decision.  

German automaker BMW also welcomed the temporary reduction of tariffs on vehicles imported from the United States. BMW also announced on Saturday that it would cut its China prices on four U.S.-made models by 3 and 7 per cent.

German luxury carmaker Mercedes-Benz on Monday said it would offer discounts on light vehicles imported from the United States until March 31 in response to Beijing's suspension of additional tariffs.

China hiked its tariff on U.S. made cars in response to the U.S. decision to raise its tariffs on Chinese vehicles and parts to 27.5 per cent. However, the U.S. is not expected to cut down its auto import tariffs on Chinese cars and parts. The tariff suspension and China’s significant soybean purchase from the U.S. are early signs that the bitter trade war between China and the United States may soon be resolved.

According to data from the China Automotive Technology and Research Center, China exported 53,300 vehicles to the U.S. market last year and imported 280,208 U.S. manufactured vehicles. China’s production of cars dropped 2.6 per cent in the first 11 months of 2018 from the same period of 2017.

According to the ministry statement, China will now suspend 25 per cent tariffs on 144 U.S. vehicle and auto part items and 5 per cent tariffs on 67 auto items between Jan. 1 and March 31.