In a vague midnight tweet, Donald Trump has thrown a potential bouquet of positivity onto a car industry that’s been unsettled by the US-China trade tariff rhetoric.
Beijing will “reduce and remove” the 40% tariffs it places on US cars imported into China, Trump said on Twitter. If true, it would change the automotive landscape and open a big door for vehicles made in America to flow into the world’s largest car market.
In fact, it’s already having an effect. Share prices for most major automakers rose on the news, with GM’s stock rising more than 4% during overnight trading. Ford jumped about 3%, as did Tesla. Any deal of this magnitude would be a boon for German automakers as well. Daimler and BMW both assemble cars in America that the respective companies would surely be glad to export to China.
Automakers would be wise to keep their expectations in check, however, as the fustian bombast blaring from the White House’s internet connection seems to change almost daily. The ambiguous language used in Trump’s tweet is also problematic as, strictly speaking, one cannot simultaneously reduce and remove something. One can lead to the other though, so it is possible Trump meant China will initially reduce the tariff as part of a plan to eventually eliminate them altogether.
It goes without saying that no timelines were given for when the tariffs may disappear.
Beijing raised tariffs on U.S. auto imports to 40 percent in July, forcing many carmakers to hike prices. The move put American-made car brands at a major disadvantage. Especially hard hit was Tesla, a company which had enjoyed robust sales in China but, according to those in the know, moved only 211 cars there in the month of October. That figure represents a gob-smacking 70% drop compared to the same month one year ago.
Talking heads and auto industry experts in both countries voiced surprise at this news, as the issue of auto tariffs had not shown up in public statements released by both the American and Chinese governments.
Right now, American auto imports make up only about a single percentage point of the Chinese market, and a solid chunk of that are Tesla machines. While U.S. manufacturers do sell cars in that country to a local populace that seems to enjoy driving American-branded machinery, most of the vehicles are made locally through joint ventures between Chinese and U.S. companies such as SAIC-GM-Wuling.
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