China’s Auto Sector Facing New U.S. Tariffs

China’s automotive manufacturing sector will be counting the cost of new tariffs announced today by U.S. Trade Representative Robert Lighthizer. They involve $50 billion worth of Chinese exports now subject to 25% duties, additional to any other duties already applied.

They will cover China-made exports of a wide range of automobiles and parts. The White House has said these tariffs will come into effect soon, although no date has been announced.

The affected products were selected from an earlier shortlist, which has been slimmed down following public consultation.

However, Lightizer in the next few weeks will consult on expanding these duties to include further tariff lines, which would include some important parts, notably electric-vehicle batteries.

Equipment covered by the new duties authorized today include petroleum, diesel and electric cars, vans and buses.

It also covers cargo trucks (both on- and off-highway), firefighting vehicles, concrete mixers, tractors and works trucks. The duties cover China-made ball bearings and insulated ignition wiring sets and capacitors.

Lighthizer says the duties are designed to impede Chinese exporters from stealing American intellectual property and using it to make cheap technology to sell to the U.S., reducing the earnings of their U.S. competitors.

“We must take strong defensive actions to protect America’s leadership in technology and innovation against the unprecedented threat posed by China’s theft of our intellectual property, the forced transfer of American technology and its cyberattacks on our computer networks,” Lighthizer says.

According to international trade data, major trade flows are under threat from these initial duties. China-made exports of passenger vehicles to the U.S. earned Chinese exporters $1.8 billion in 2017, up from $1.2 billion in 2016.

Sales of China-made public transport vehicles to the U.S. generated $26 million worth of receipts in 2017. Ball-bearing sales are significant: China sold $349 million worth to the U.S. in 2017, as well as $25.6 million worth of copper winding wire used as insulated electric conductors.

Chinese retaliatory duties are expected soon. A spokesperson for China’s Ministry of Commerce says its government is disappointed, given the two countries recently have conducted rounds of consultations on bilateral trade.

“This move not only hurts bilateral interests, but also undermines world trade order,” the spokesperson says. “The Chinese side firmly opposes that.”

China has “no choice but to fight back forcefully to firmly safeguard the interests of the nation and its people and uphold economic globalization and the multilateral trading system,” says a ministry statement.

As for future additional U.S. duties under consideration, a shortlist includes China-made aluminum stranded wire and cable, as well as storage batteries used as the primary source of electrical power for EVs.

See current duties: https://ustr.gov/sites/default/files/enforcement/301Investigations/List 1.pdf

See shortlist for additional duties: https://ustr.gov/sites/default/files/enforcement/301Investigations/List 2.pdf