The US president Donald Trump has tweeted that ‘China has agreed to reduce and eliminate tariffs of 40% now for vehicles imported from the United States’. In July, the Chinese government raised tariffs on cars imported from the United States from 15% to 40%.
Both the presidents at the meeting on the margins of the G20 summit in Argentina agreed to undertake efforts to conclude a new trade agreement for 90 days. At the same time, the head of the White House agreed not to raise tariffs on Chinese products worth $200bn from 10% to 25% from January 1.
Earlier, RBC reported that the US earlier announced that during the negotiations at the G20 summit in Argentina, the US administration managed to obtain from the Chinese leadership the agreement to increase purchases of agricultural and industrial products produced in the United States. It was agreed that the United States temporarily froze raising the sanctioning tariffs on imports from China. The reduction and exemption of automobile tariffs may have made a concession by China to ease the trade friction with the United States. However, Washington has promised to raise duties if, during this period, the parties do not demonstrate progress in the negotiations.
Tariffs on passenger cars in the US are 2.5%. For imported cars from China, United States apply the tax rate of 27.5% in total by adding the 25% additional tariff that is activated in July at the first sanction against anti-intellectual property right infringement. While China reduced the tax rate on imported cars in general to 15% in July, it added a 25% retaliatory tariff to US vehicles and set the tax rate to 40% in total.
Both China and the United States have raised import tariffs imposed on each other’s cars in a tit-for-tat trade war. The United States imposes a 25% tariff on Chinese cars exported to the United States on the basis of a typical tax rate of 2.5%. China has lowered tariffs on all other countries to 15%, but imposes an additional 25% retaliatory tariff on US cars.
On November 29, 2018, US trade representative Wright Heze had said that he was studying all the tools available to raise the US tariff on Chinese cars to 40%, which is equivalent to the current level of Chinese car-made cars. Wright Heze said in a statement that he is taking this action in accordance with President Trump’s instructions.
Earlier in China, the US was accused of ‘trading bullying’ and forcing other countries to adjust to the position of the United States for imposing new duties against them. However, Beijing also assured that they are ready to sit at the negotiating table on trade agreements at any time if they are based on mutual respect and equality.
The Trump administration is seeking China to revolutionize state-led economic policies, including requiring new safeguards for US intellectual property rights, ending joint venture regulations, expanding US market access for US companies, and reducing China’s industrial subsidies.
In addition to the trade war, the United States planned to launch a broad offensive against China at the administration level, accusing it of hostile activity against American companies, abduction of intellectual property, cyber attack and interference in elections.
Earlier, American Automobile Manufacturers Association (AAM) reported that after adding 25% tariff on imported cars, the average US consumer who buys imported cars will pay an extra $5800. Based on 2017 national sales data, the economic impact of the tariff on US consumers is close to $45bn and these calculations have not included the impact of tax on auto parts.