Manufacturing News

Chinese import tariffs on U.S.-built vehicles are mostly symbolic

When U.S. trade regulators ruled this month that China was exporting photovoltaic cells to the United States at below-market prices, Beijing was worried and angry.

The Chinese government wanted to retaliate, and vehicle imports from the United States were a convenient target.

On Wednesday, China's Ministry of Commerce introduced anti-dumping tariffs on vehicles imported from the United States with engine sizes of 2.5 liters and larger.

Fortunately, the measure is mostly a political gesture and its impact on the U.S. auto industry will be limited.

Modest impact

China currently levies a 25 percent tariff on imported cars, according to Bloomberg News.

Starting Thursday, the government is adding extra duties ranging from 2 to 21.5 percent on U.S.-built vehicles with engine displacements of 2.5 liters or larger.

In addition, the government has imposed an anti-subsidy tariff that can range up to 12.9 percent. These duties will remain in effect for two years, according to the Web site of China's Ministry of Commerce.

Ford Motor Co. is unaffected by China's new tariff because its Edge crossover is exported to China from Canada.

General Motors will be affected to a limited extent. GM's imports of U.S.-built vehicles are less than half of one percent of its Chinese production, according to the company.

Moreover, the U.S.-built vehicles in GM's Chinese lineup are mostly high-priced models such as the Cadillac SRX and Buick Enclave crossovers, notes Jochen Siebert, head of JSC Automotive Consulting. "A higher price doesn't really deter the end consumers of these vehicles as they tend to be well off," Siebert said.

With no assembly plant in China, Chrysler imports about 24,000 vehicles into the country, according to Bloomberg News, which cited an investors' report by Citigroup Inc.

John Zeng, the Asia forecasting director of LMC Automotive, told Automotive News China that the Jeep brand could be hit hard. "Sales of some Jeep-brand models, especially the Grand Cherokee and the Wrangler, will take a hard beating," Zeng predicted.

Imports of U.S.-made Mercedes-Benz, BMW and Honda models also will be affected. For example, BMW exports 25,000 vehicles from North America, according to Bloomberg.

But the tariffs applied to these models are much lower, ranging from 2 percent to 4.1 percent.

Overall, the tariffs won't have any significant impact on China's auto market. "The affected models only account for 9 percent of total sales of imported vehicles in China," Zeng said.

So the import tariffs China slapped on U.S.-made vehicles won't impact the auto industry in the United States or China in any big way.

Tit for tat

Still, the auto industry is worried about the potential for a full-scale trade war. The new levies originally were meant to be retaliation for the U.S. government's anti-dumping duty on tire imports from China.

In 2009, the Obama administration slapped tariffs of as much as 35 percent on Chinese tires. Beijing quickly retaliated with an anti-dumping probe of U.S.-made vehicles.

Last April, China's Ministry of Commerce ruled that vehicles imported from the United States with engine displacements of 2.5 liters and larger had received unfair U.S. government subsidies. But the ministry refrained from imposing punitive tariffs for fear of unleashing a trade war.

After the United States slapped tariffs on Chinese solar cells, the ministry decided to take revenge. The easiest thing it could do was to enact the tariffs on U.S. vehicles that it had shelved earlier.

"I am more worried about the symbolic nature of the duties," said Siebert, "because it might lead to an escalating tit-for-tat situation that might spin out of control."

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