China is reportedly close to cutting its tariffs on US cars, a big trade-war concession to Trump

  • China is set to consider lowering its tariffs on US cars and trucks to 15% from the 40% level set in July, according to a new report.
  • The move would fulfil a promise made by President Donald Trump soon after he met with Chinese President Xi Jinping.
  • The tariff reduction would be significant, as the US sent $US10.5 billion worth of new and used cars to China in 2017.

The Chinese government is set to consider a reduction of tariffs on US cars and trucks, according to a new report, in a move that could help deescalate trade tensions between the US and China.

Bloomberg reported Tuesday that a proposal to cut China’s tariffs on US autos to the 15% paid by other nations from 40% was submitted to China’s cabinet and could be reviewed in the next few days.

While no final decision has been made, according to the report, the move would fulfil a promise touted by President Donald Trump in the days following his meeting with Chinese President Xi Jinping at the G20 summit.

“China has agreed to reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40%,” Trump tweeted on December 2, the day after a dinner with Xi in Buenos Aires, Argentina.

The tweet was met with confusion as neither the US nor China included an auto-tariff reduction in its official statement on the agreements the two leaders reached.

Over the next few days, Trump advisers began to backtrack on the president’s promise, saying no deal had been formally reached to bring down the auto tariffs.

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But it appears that Beijing is trying to appease Trump by dropping the tariffs, an important move as $US10.5 billion worth of new and used cars were shipped from the US to China in 2017. According to China’s Passenger Car Association, 10% of the country’s 2017 car imports were from the US.

Automakers with major US operations have reported disruptions over the tariffs. For instance, Ford saw sales in China dive after China increased its tariffs to 40% in July as a part of its trade fight with the US. Additionally, China-bound shipments of BMW models made in South Carolina also tanked.

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Reducing the tariffs would also give Trump a major win in the trade negotiations, which could help bolster the president’s argument for the tough tactics used against China.

Though the Trump team insists on getting auto tariffs down to zero, Beijing would be unable to do so just for the US, as World Trade Organisation rules would require it to lower the tariff for all nations to zero. Fifteen per cent is China’s “most favoured nations” level being levied on all other nations when shipping to China.

Following the news, shares of US automakers ticked higher in premarket trading. Both GM and Ford were up just over 2% as of 8 a.m. ET.