China to cut auto tariffs on Jul 1 as trade tensions ease

The tariffs cut comes after China earlier this year also announced plans to liberalise foreign ownership limits in the auto sector. (Photo: AFP/STR)

Beijing has announced a flurry of liberalisations and reforms since coming under fire from the Trump administration and some European politicians for its protectionist policies.

The planned reduction in import duties from 25 per cent to 15 per cent is a boon for international carmakers keen to grow sales in the world's largest auto market but may fall short of fulfilling US President Donald Trump's expectations that Beijing match US tariffs of 2.5 per cent.

Demands reportedly put to Beijing by Washington at the start of trade talks called on China to lower all tariffs to at least match those of the US.

Trump has been following the issue closely and on Monday tweeted, "On China, Barriers and Tariffs to come down for first time." The announcement in Beijing came days after Vice Premier Liu He and US Treasury Secretary Steve Mnuchin led negotiations in Washington which ended with an agreement to pull back from the brink of a trade war.

The two sides agreed to refrain from imposing tariffs threatened on billions of dollars' worth of goods that would have dented US-China trade.

But even as Trump has talked up the agreement, writing on Twitter that China "will purchase from our Great American Farmers practically as much as our Farmers can produce," other members of his administration have split on the detente and said tariffs were still on the table.

"Real structural change is necessary," US Trade Representative Robert Lighthizer said of China's economy in a widely cited statement released on Sunday.

"Nothing less than the future of tens of millions of American jobs is at stake."

GERMAN CARMAKERS HAPPY

In Beijing China's foreign ministry spokesman Lu Kang said on Tuesday the US would send a high-level delegation to China to hold "detailed conversations" at an unspecified date.

In addition, Foreign Minister Wang Yi plans to travel to Washington on Wednesday to "exchange views on bilateral relations and issues of common interest".

President Xi Jinping announced in April that China would "considerably lower" tariffs on cars by the end of the year as part of a range of measures seen as an olive branch to Trump.

The cut to 15 per cent will be welcomed by automakers selling cars in China, with Toyota importing its Lexus brand and American giant Ford shipping in Lincolns.

German luxury automakers are expected to be among those benefitting the most, and shares in BMW and Daimler, owner of Mercedes-Benz, both jumped on the news, while Volkswagen subsidiary Porsche said the cut showcased China's "open market".

Berlin also welcomed the move.

"We welcome this announcement, it's a good idea," a German government official said, adding that it would be "a positive" for German carmakers, which according to industry estimates export some 500,000 vehicles to China each year.

In a tweet to Trump earlier this year, Tesla CEO Elon Musk spoke out against the high tariffs and barriers to selling his electric sedans and SUVs in China, calling it "like competing in an Olympic race wearing lead shoes".

China's announcement also included a lowering of import duties on many types of auto parts.

Earlier this year China announced plans to liberalise foreign ownership limits which had forced most foreign carmakers into joint ventures with state-owned companies.

China currently restricts foreign auto firms to a maximum 50 per cent ownership of such joint ventures.

The changes will scrap shareholding limits for new-energy vehicle firms as soon as this year, followed by commercial vehicles in 2020 and passenger cars in 2022.