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China to cut tariffs on U.S. light vehicles to 15%, Trump official says
Wire reports | 2018/12/14

BEIJING -- China has agreed to cut tariffs on U.S.-built light vehicles and auto parts to 15 percent from the current 40 percent, a Trump administration official told Reuters on Tuesday, setting the stage for new talks aimed at easing the bitter trade war between the world's two largest economies.

Washington still had not received documentation nor details about the timing of the lower tariffs, the official said, speaking on condition of anonymity.

China's plan was communicated during a phone call between Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin early Tuesday in Beijing, the official said.

News of the move, also reported by other media outlets and automotive executives briefed on the talks, boosted automakers' shares and helped lift U.S. shares more broadly before worries about a U.S. government shutdown prompted a pullback.

The proposal to reduce tariffs on cars and light trucks made in the U.S. has been submitted to China's cabinet to be reviewed in the coming days, people familiar with the matter told Bloomberg.

The step hasn't been finalized and could still change. The reports signaled that dialog between the two nations on trade issues is at least continuing despite a diplomatic dispute over the arrest of a senior Chinese businesswoman.

China's Finance Ministry didn't respond to a request for comment.

In July, China had boosted the tariff on American-made cars to 40 percent as part of retaliatory measures against the U.S. Following a summit on trade in Buenos Aires earlier this month, President Trump tweeted that China agreed to "reduce and remove" tariffs on imported American-made cars, something China did not confirm at the time.

Trump's tweet came shortly after he agreed with Xi to a truce in the trade war during a meeting at the Group of 20 summit in Argentina.

The trade war has taken a toll on car companies that manufacture in the U.S., with the makers of Mercedes-Benz and its rival BMW both warning of lower profits this year as tariffs forced them to hike prices in China.

Light-vehicle sales in the world's second-biggest economy declined for a sixth consecutive month in November, bringing the market closer to its first annual drop in at least two decades. That's piled pressure on auto companies that have relied on the country for growth amid declining car sales in the U.S.

The tariff reduction benefits Daimler and BMW more than U.S. automakers such as General Motors or Ford Motor Co. That's because the German luxury brands dominate the top 10 list of vehicle imports into China.

Longer-term, China has a lot to gain from free trade in autos as Chinese manufacturers such as Guangzhou Automobile Group Co. and Geely Automobile Holdings look to move overseas. The U.S. currently charges a 27.5 percent tax on imported cars from China.

Of China's $51 billion of vehicle imports in 2017, about $13.5 billion came from North America, including sales of models made there by non-U.S. manufacturers like BMW. China imported 280,208 vehicles, or 10 percent of total imported cars, from the U.S. last year, according to China's Passenger Car Association.

U.S. exports of cars and light trucks to China were worth $9.5 billion in 2017 and have dropped off significantly since China imposed its retaliatory tariffs over the summer that gave exporters in Europe and Japan a significant advantage.

For Tesla, a tariff cut will provide a boon until the company sets up local production. The company has been working with Shanghai's government on establishing a factory to assemble cars in China.

Foreign carmakers have long pleaded for freer access to China's auto market, while its own manufacturers are trying to expand abroad. In April, China announced a timetable to permit foreign automakers to own more than half of local light-vehicle manufacturing joint ventures.

Reuters and Bloomberg contributed to this report.

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