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White House adviser expects China's tariffs on U.S. autos to fall to zero
Reuters | 2018/12/4

WASHINGTON/SHANGHAI -- White House Economic Adviser Larry Kudlow on Monday said that China could immediately slash its vehicle tariffs, as the country enters a 90-day truce in the current battle with the United States to negotiate a trade deal, as he reiterated China's pledge to begin lifting barriers immediately.

Kudlow said on a call with reporters that he believed the immediate action could include China reducing its 40 percent tariffs on U.S.-produced vehicles and that he expects Beijing will quickly roll back new retaliatory tariffs it had imposed on agricultural imports as the trade war heated up.

"We expect those tariffs to fall to zero," he said in reference to the auto tariffs.

Kudlow said that the 90-day clock for negotiations would start on Jan. 1, but that China had pledged to start lifting both tariff and non-tariff barriers quickly, and could act as soon as Monday.

"I've never heard that 'immediately' commitment before," Kudlow said. "Now, you ask me what that means specifically, all I can say is we'll see. I presume it will include things like car tariffs and various transactions and agriculture industry, energy and so forth. It could mean licensing, ownership. They are pretty close to some agreements on the IP (intellectual property) theft. And we're pretty close to agreements on the forced transfer of technology."

Late Sunday in Washington, President Donald Trump said China had agreed to cut import tariffs on American-made cars. If the tariffs are reduced, it would bolster U.S. carmakers that were hit hard when China ramped up levies on U.S.-made cars in July as part of retaliatory tariffs amid the trade war between Washington and Beijing. 

Trump, fresh from agreeing to a 90-day cease-fire in his trade war with China at the meeting of the G20, said on Twitter, "China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%".

Wang Cun, director of the China Automobile Dealers Association's import committee, told reporters in Beijing, "If they cancel the extra 25 percent tariff on U.S.-made cars, then we will see positive signs for imported cars."

Beijing raised tariffs on U.S. auto imports to 40 percent in July, forcing many carmakers to hike prices in a hit to the roughly $10 billion worth of passenger vehicles the United States sent to China last year.

That put U.S.-made car brands such as Tesla Inc. and Ford Motor Co.'s Lincoln at a disadvantage as the move came soon after China slashed auto import tariffs for the wider market to 15 percent from 25 percent.

Trump's tweet gave no further details about the tariff cuts, such as when the deal had been reached or a new level for the Chinese levies.

China's commerce and finance ministries did not respond to requests for comment Monday.

Trump and Chinese President Xi Jinping agreed to halt new tariffs during talks Saturday in Argentina, after months of escalating tensions on trade and other issues.

After a dinner with Xi Saturday in Buenos Aires, Trump agreed to postpone an increase in the tariff rate on $200 billion worth of Chinese imports to 25 percent from 10 percent that was scheduled for Jan. 1. China agreed to resume purchases of some U.S. farm and energy commodities.

The two sides also agreed to negotiate in the next 90 days over "structural changes" to China's policies on technology transfers, intellectual property protection, nontariff barriers, cyber intrusions and theft, services and agriculture.

Major U.S. automakers said they were unaware of the lower tariffs on exports to China.

The automakers have a previously scheduled meeting with the U.S. trade representative on Monday, two people briefed on the matter told Reuters.

The lower tariffs would be a boost to automakers exporting vehicles to China, including Ford and German carmaker BMW, which exports U.S.-built luxury vehicles to China.

It would also be good news for Tesla that has been hit hard by increased tariffs on the electric cars it imports to China.

The U.S. company, led by billionaire Elon Musk, has said it will cut prices to make its cars "more affordable" and absorb more of the hit from the tariffs. Tesla is also building a plant in Shanghai to help it avoid steep tariffs.

The United States charges tariffs of 27.5 percent on Chinese vehicles. On Wednesday, U.S. Trade Representative Robert Lighthizer said Trump had directed him to examine all available tools to raise U.S. tariffs on Chinese vehicles to the level that China is charging.

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