Last night China’s forever president announced that he was going to significantly cut tariffs on imported cars:
FOX NEWS – China’s President Xi Jinping appeared to strike a conciliatory tone during a speech Tuesday where he promised to cut China’s auto import tariffs and ease restrictions on foreign ownership in its auto industry as tensions play out with Washington over tariffs.
Xi made no direct mention of the dispute with President Donald Trump but pledged to open China’s markets further and improve conditions for foreign companies. He warned against having a “Cold War” mentality, which he called outdated, according to Bloomberg.
“We will take the initiative to expand imports,” Xi said during his keynote speech at the opening of the Boao Forum for Asia, China Plus News reported. “China does not seek trade surplus; we have a genuine desire to increase imports and achieve greater balance of international payments under the current account,” he said.
Xi said Beijing will “significantly lower” tariffs on auto imports this year and ease restrictions on foreign ownership in the auto industry as soon as possible.
China charges total duties of 25 percent on most imported cars — a 10 percent customs tariff plus a 15 percent auto tax. Since December 2016, Beijing also has charged an additional 10 percent on “super-luxury” vehicles priced above $200,000.
Just yesterday Trump tweeted this:
When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!
— Donald J. Trump (@realDonaldTrump) April 9, 2018
Xi’s remarks would seem to be in response to this. But according to CNN Money, this isn’t the first time Xi has mentioned lowering tariffs on auto imports:
But many of the steps he outlined are ones Beijing has already proposed in some form.
For example, the Chinese government had promised in November to “gradually and properly” reduce tariffs on imported vehicles, though it didn’t give a specific time frame for doing so.
“President Xi’s remarks do not represent a dramatic departure from existing Chinese policy, but rather a reiteration of the same themes Xi has promoted throughout his tenure atop China’s policy making system,” said Chaoping Zhu, global market strategist at JP Morgan Asset Management.
It would seem to me that the timing of this announcement by Xi isn’t coincidental. Clearly the threat of a trade war is in the air and his comments do seem to address that, at least indirectly. And perhaps he’s decided that instead of ‘gradually and properly’ lowering tariffs on auto imports, the time is right to lower tariffs more ‘significantly’ to help de-escalate matters.
But is this really China ‘caving’ to Trump’s pressure? I think it’s a strong maybe, but I don’t think we have enough information to come to that conclusion yet. If China is truly caving, then I think they will follow suit and take their retaliation threat of increased tariffs on $50 billion of US goods off the table.
But regardless, this is a good sign and a hopeful one to keep us out of a trade war.