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Trade War

China to lower tariffs on US-made cars for 3 months

Trump says trade war is hurting Beijing and expresses confidence in early deal

U.S. electric vehicle maker Tesla's Chinese sales sank 70% year-on-year in October due to a price hike associated with the additional levies.   © AP

BEIJING -- The Chinese government said Friday that it will suspend additional tariffs on American cars from Jan. 1 through March 31, slashing the rate from 40% to 15%, as Beijing seeks to soothe trade tensions with certain concessions to Washington.

The suspension marks China's first tariff reduction since the two countries exchanged additional levies in July. The reductions cover 211 items including vehicles and auto parts.

Following the announcement, U.S. President Donald Trump expressed confidence in an early deal with Beijing.  

"China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended U.S. Tariff Hikes," he tweeted on Friday. "U.S. is doing very well. China wants to make a big and very comprehensive deal. It could happen, and rather soon!" he wrote.

Earlier in the day, China announced that retail sales in November rose 8.1%, the lowest growth rate in 15 years, signaling a weaker consumer sentiment amid the uncertainties of the trade war. 

Beijing lowered car tariffs from 25% to 15% on July 1, but added an extra levy of 25 percentage points for U.S. goods starting July 6 after Washington imposed further duties on $200 billion worth of Chinese goods. As a result, China's tariffs on American autos amounted to 40%, making them far more expensive than Japanese and European rivals.

Trump may seek further tariff reductions from China. "It's not acceptable. Fifteen [percent] is still too high," the president said Thursday in an interview with Fox News.

At their summit on Dec. 1, Trump and Chinese President Xi Jinping agreed to shelve additional American tariffs -- which would have raised the tax on $200 billion worth of Chinese goods to 25% from 10% on Jan. 1 -- in exchange for greater purchases of U.S. products.

Beijing will increase imports of U.S. agricultural products, energy and industrial goods, Washington says. The decline in the auto tariff also results from the summit.

American and European automakers likely will benefit. U.S. electric vehicle maker Tesla's Chinese sales sank 70% year-on-year in October due to a price hike associated with the additional levies, according to local media. German automakers Daimler and BMW also have been hurt by the extra tariffs because they export U.S.-made cars to China.

The leaders also agreed to 90 days of talks covering China's intellectual property protections, forced technology transfers and nontariff barriers. If no agreement is reached by the end of February, the U.S. intends to follow through with raising the additional duties on $200 billion of Chinese goods to 25% from 10%.

Should Washington do so, Beijing likely will increase auto tariffs again in retaliation. Automakers around the globe will continue to struggle with long-term strategy as their supply chains, intertwined with the U.S. and Chinese economies, remain unstable.

But the negotiations face hurdles, including the arrest of Huawei's chief financial officer in Canada at Washington's request. China's Ministry of Commerce has maintained that communication between negotiators is smooth and that they are cooperating well.

Beijing appears to be disconnecting the Huawei issue from trade talks as it prioritizes a cease-fire to stop the economic bleeding. If Washington pushes forward with sanctions on the company, however, that would threaten negotiations.

"China can compromise on issues other than sovereignty and the right to economic development," a Commerce Ministry official said. Beijing is considering the cancellation of additional tariffs on U.S. soybeans and natural gas as well.

Yet Xi remains leery of Trump after he reversed an agreement in May to put the trade war on hold after high-level talks. China's decision to lower car duties in January is likely aimed at determining whether Trump will keep his end of the deal this time.

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