U.S., Chinese Parts Makers Caught in Trade War Crossfire

U.S. and Chinese automotive parts exporters both could suffer from the latest tit-for-tat round of protective duties imposed by their governments.

China exporters may have the most to lose if the U.S. tariffs deter American purchases. The U.S. Trade Representative confirmed Sept. 18 that America will impose 10% tariffs on a wide range of products from China. These duties will be imposed Sept. 24, rising to 25% on Jan. 1 unless the two countries settle their trade differences by then.

The tariffs focus on American complaints about the alleged Chinese theft of U.S. intellectual property.

As for the U.S. duties, they will be levied on a wide range of Chinese exports of auto parts.

These include radial tires for cars and more specialized tires for trucks, buses and vans; Chinese automotive glass products including windshields and mirrors; and Chinese-made seatbelts, transmissions, door assemblies, chassis, instruments, seats and more.

See for full list. https://ustr.gov/sites/default/files/enforcement/301Investigations/Tariff%20List_09.17.18.pdf

These U.S. duties could hurt Chinese exporters; the tire sector could be a major victim. More than $2 billion worth of tires were exported from China to the U.S. last year, with truck and bus tires accounting for $874 million and light-commercial vehicles accounting for $758 million.

Also, tempered safety glass worth $579 million was exported from China to the U.S. in 2017, along with $395 million in internal-combustion piston engines (not for ships or aircraft);

motor-vehicle seats worth $42 million; and $37 million in rearview mirrors, according to international trade data.

China’s Ministry of Finance has responded swiftly to the USTR announcement, imposing retaliatory tariffs. Some are higher than the U.S. rates, for example, 25% on tires to be imposed the same day, Sept. 24.

See https://translate.google.com/translate?hl=en&sl=zh=CN&tl=en&u=http%3A%2F%2Fgss.mof.gov.cn%2Fzhengwuxinxi%2Fzhengcefabu%2F201808%2Ft20180803_2980950.html&sandbox=1

There also is a list of products, including auto air conditioners, on which China will impose 20% duties – and levy the same day.

China also intends to impose 10% duties on U.S.-made auto parts including ignition wiring groups, tempered glass, rearview mirrors, locks, spark plugs, audio-signal devices and fuel filters, also on Sept. 24. A wider list of parts covered by a lower additional duty of 5% includes U.S.-made chassis, axles, wheels, brakes, vehicle frames, radio navigation kits and seats.

Whether more tariffs will be imposed on the U.S.-China auto and auto-parts trade remains to be seen. The USTR notes it already has imposed tariffs on Chinese goods with a combined annual trade value of approximately $50 billion, “with the goal of obtaining the elimination of China’s harmful acts, policies and practices” regarding intellectual-property transfers.

But the agency adds China has remained “unwilling to change its policies involving the unfair acquisition of U.S. technology and intellectual property.” As a result, President Trump ordered the imposition of this latest round of protective tariffs, with the goal of forcing the Chinese government to change course.

By contrast, the Chinese State Council Tariff Commission has been far less vocal, restricting itself to the technical announcement that the new retaliatory duties it authorized would be imposed. Some trade experts interpret the lack of rhetoric from the Chinese government as an indication Beijing is keen to strike a deal with the U.S. and roll back this year’s duties.

Talks have been held between the two countries on trade issues in recent weeks, and thus far neither side has said future negotiations would be blocked because of the latest tariff exchange.