Nine days after President Donald Trump announced China would cut auto tariffs, the import duty cuts appear to be underway.
Bloomberg News reported that a proposal to cut the tariffs on U.S. made autos to 15 percent from 40 percent had been submitted to China’s cabinet. The Bloomberg story cited people familiar with the matter.
China slashed its tariff on imported cars from 25 percent to 15 percent in May, hoping to appease President Trump into holding off on raising tariffs. But after the U.S. imposed tariffs on $50 billion of Chinese goods, it raised tariffs on U.S. autos to 40 percent in July in retaliation.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
Shares of General Motors and Ford jumped initially jumped on the news, with both rising more than 2 percent. Tesla shares also rose. But by noon, shares of Ford and Tesla were up by less than 1 percent while shares of General Motors continued to climb.
Trump appeared to preview an announcement on the tariffs from China in a tweet Tuesday morning.
Very productive conversations going on with China! Watch for some important announcements!
— Donald J. Trump (@realDonaldTrump) December 11, 2018
Even after the cuts, however, Chinese tariffs on autos will still be relatively high. The United States charges a tariff of 2.5 percent on cars, minivans and sport utility vehicles. Pick-up trucks are protected by a U.S. tariff of 25 percent. Even with a 15 percent tariff, it is unlikely many automakers will shift production out of China.