China agrees to cut down on import tariffs on American-manufactured cars, according to a social media post from US President Donald Trump. This news proves beneficial for the auto industry, who are aiming to increase their value in the world’s largest automobile market. General Motors sees their shares jump up to more than 4 percent in premarket trading, while both Ford Motor Company and Tesla rise up to 3 percent.
Chinese car dealers also perked up their shares, hoping that the temporary US-China treaty will help improve the domestic market. China’s auto market is preparing its first annual sales contraction in years despite the decrease of economic growth.
Last July, Beijing raised tariffs of up to 40 percent on imported cars, forcing carmakers to increase the prices on vehicles sent to China for the year. The extra taxes meant US auto companies like Tesla and Ford’s Lincoln staring down financial losses.
US car manufacturers that were deeply affected by the US-China trade war will see their profits gain steam. China Automobile Dealers Association’s Import Committee Director Wang Cun states that imported cars will benefit from the cancellation of the new tariff levied by China against the US.
US President Trump’s social media post does not include further details regarding the deal he made with Chinese President Xi Jinping. There was also no response from the White House nor the US Trade Representative’s Office.
The Rise of Imported Car Shares
The cancelation of tariffs proves to be good news for international trading markets in Europe. German auto companies like BMW, Volkswagen, and Daimler watched their stock rise four to seven percent, depending on the company.
China’s listed car dealers Grand Automotive, Pangda Automobile Trade, and Sinomach Automobile also attempt to benefit from the development as well.
After months of disagreements over trade, US President Trump and Chinese President Xi Jinping made a deal to stop new tariffs during their meeting in Argentina. After a lengthy dinner with the Chinese President, Trump agreed to cancel an increase on Chinese import’ tariff rates, which was scheduled to take effect in 2019. China also agreed to resume business talks of purchasing US farm and energy resources.
Over the next three months, US and China will negotiate over structural changes of China’s policies on other US products like intellectual property protection, cyber intrusions and theft, services, technology, agriculture, and non-tariff items.
US Auto Companies are Keen
Most of the major car manufacturers in the US are unaware of the lower tariff rule on imported cars to China. The major auto industries schedule meetings with the US Trade Representative’s Office to learn more about the US-China tariff treaty. The decreased tariffs will provide a boost for auto industries on the Beijing market.
The development bodes well for Ford Motor Company and BMW, which export luxury vehicles made from the US to China. The US-China agreement also means good news for Tesla, which took the hardest hit. China imports a vast amount of electric cars and Tesla sales in China have taken a hard hit during the tariff wars.
Tesla’s co-founder and CEO Elon Musk stated that they plan to make their electric cars more affordable for Chinese citizens. The company also plans to lessen its tariff rates by building a local factory in Shanghai. A local plant in the country would Tesla avoid high-priced import tariffs.
As of today, the US charges 27.5 percent of tariffs on China-manufactured vehicles. Robert Lighthizer, a US Trade Representative, reveals that President Trump ordered him to match the tariff rate that China is charging against their country.