Automakers share prices surged upon news that China had agreed to reduce tariffs.
On Sunday evening, President Donald Trump tweeted that China had agreed to “reduce and remove” tariffs on cars imported from the U.S. The news comes on the heels from this weekend’s G20 summit, where the president also agreed to a 90-day cease-fire on the United States’ escalating trade war with China. If this latest move does go forward, it could be a boon to U.S. automakers whose bottom lines took a hit when the tariffs ramped up earlier this year. General Motors, Ford and Fiat-Chrysler’s share prices have all risen on the news. Shares in European automakers, including BMW, Volkswagen and Mercedes-Benz also rose Monday, according to a Reuters report.
However, the Chinese Foreign Ministry and Commerce Ministry did not offer any comments on tariff reductions. Their weekly press conference is this upcoming Thursday. As the Chinese government has not currently confirmed Trump’s tweet, it’s not clear it will slash tariffs at this point.
Automakers’ response to tariffs
Automakers like Lincoln planned to accelerate their expansion into the Chinese market, as new tariffs were set to begin January 1. After a 2-1/2 hour dinner with Chinese President Ji Xinping, Trump agreed to postpone a further $200 billion in tariffs by raising current levies to 25 percent from 10 percent.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
Trump’s tweet itself is unclear, saying China would “reduce and remove” tariffs on U.S.-built cars. Whether China plans to lower the tariffs to U.S. levels or completely remove them is unclear. Right now, the U.S. imposes a 27.5-percent tariff to Chinese-built automobiles.
The U.S. Trade Representative’s office released a statement that it is still looking into tools to level the playing field on automotive tariffs. “At the president’s direction, I will examine all available tools to equalize the tariffs applied to automobiles.” According to Reuters, automakers are unaware of any effective tariff changes as of Monday morning.
We’ll provide further updates as they become available.