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The trade war between the United States and China has escalated again on Friday, the People's Republic making a turnaround by giving up processing vehicles built in the United States. In mid-December, China will hit incoming US vehicles at 25 percent. Auto parts will be charged 5%.
The new car rates, well resurrected, are a reactionary measure. They were proposed after US President Donald Trump proposed, and deferred, the imposition of a tariff of 10% on 300 billion dollars of Chinese goods. Some import taxes will come in September, but the full range of tariffs is expected to come into effect on December 15. China's auto tariffs, lifted for the first time last year and lifted earlier this year in the style of an olive branch, are part of a broader set of tariffs that impact 75 billion dollars of US goods. A tariff of 5 to 10% hits US non-automotive goods on September 1st.
It is not surprising that all car manufacturers want to build vehicles for the Chinese market within the borders of this country.
In announcing the imminent tariffs, the Chinese Ministry of Finance said Trump's trade threats "seriously threaten the multilateral trading system".
"China has been forced to take countermeasures," he added.
The easing of China's tariffs allowed the country to maintain tariffs of 15% while the two countries continued their trade negotiations. A July meeting between the two parties did not yield much fruit. Nevertheless, the talks are apparently still about to resume in September, according to the White House.
While automakers such as General Motors and Ford are doing great business in the Chinese market, which is now very difficult, many of these vehicles are coming out of joint venture assembly plants in China. (Ford plans to increase its presence in this market with Lincolns increasingly built locally.) Foreign manufacturers with a strong manufacturing footprint in the United States will bear the weight of the proposed tariffs, and this morning, their stocks reflected .
BMW shares fell more than 2% Friday, while Daimler AG suffered the same shock before bouncing slightly. As Bloomberg note, LMC Automotive data show that six of the top 10 US auto exports come from these two companies. Tesla, which is currently building an assembly plant in Shanghai while transporting cars to Chinese customers via California, has seen its stock fall by more than 2 percent.
Trump did not seem baffled by China's actions, taking on Twitter to counteract the country's economic influence in a series of messages we will post in sequence here:
"Our country has stupidly lost billions of dollars with China for many years. They stole our intellectual property for hundreds of billions of dollars a year and they want to continue. I will not let that happen! We do not need China and, frankly, it would be far away.
"..Better better without them. The huge amounts of money that the Chinese manufacture and fly in the United States, year after year, for decades, go and must stop. We are ordering our major US companies to immediately begin looking for an alternative to China, including bringing your business home and making your products in the United States. I will respond to China's tariffs this afternoon. This is a great opportunity for the United States. In addition, I order all carriers, including Fed Ex, Amazon, UPS and La Poste, to search "SEARCH & REFUSE", ….
"… All shipments of fentanyl from China (or elsewhere!). Fentanyl kills 100,000 Americans a year. President Xi said that would stop – this is not the case. Our economy, because of our gains over the last two and a half years, is MUCH larger than China's. We will continue like this!
[Sources:[Sources:[Sources:[Sources:MarketWatch, BBC]
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