Automakers urge calm as China threatens new tariffs
Washington — Automakers are urging caution as a potential trade war heated up after China threatened new tariffs on cars, trucks and SUVs imported there from the United States.
The Chinese government announced Wednesday that is considering 25 percent tariffs on a list of 106 additional products from the U.S. that includes motor vehicles, automotive parts, soybeans, corn and beef. The move comes after President Donald Trump directed U.S. officials to impose tariffs on $50 billion worth of Chinese imports last month, citing an “out of control” trade deficit after a months-long investigation into intellectual property theft.
China is the world’s largest automobile market with more than 25 million vehicles sold last year, compared with 17.23 million in the United States. Last year, 267,473 new cars and trucks were exported to China from the U.S., according to the Statista.com.
Automakers reacted to the Chinese pronouncement with appeals to both sides to cool the rhetoric.
“We encourage both governments to work together to resolve issues between these two important economies,” Ford Motor Co. said in a statement.
General Motors Co. added: “We support a positive trade relationship between the U.S. and China, and urge both countries to continue to engage in constructive dialogue and pursue sustainable trade policies. We continue to believe both countries value a vibrant auto industry and understand the interdependence between the world’s two largest automotive markets.”
Fiat Chrysler Automobiles NV declined to comment.
Charlie Chesbrough, senior economist and senior director of industry insights for Cox Automotive, said most U.S. automakers would not take a serious hit under China’s retaliatory tariffs because they largely produce in China the vehicles that they intend to sell there.
“We don’t manufacture a lot of vehicles here to sell in China,” he said. “Most vehicles that are sold in China are manufactured there.”
Chesbrough said the domestic automaker that is most vulnerable to tariffs is Tesla Inc., which sold almost 15,000 cars in China last year.
“China is a big electric-vehicle market and Tesla has no manufacturing capability in China,” Chesbrough said. “China has declared themselves the world leader in electrification and Tesla is going to need to be in there.”
Tesla declined to comment.
Chesbrough said Ford could have some vulnerability because it imports some Lincolns and Mustangs to China, but he said the volumes they produce domestically for sale in China are small. “I think it’s less than 20,000,” he said.
German manufacturers BMW and Daimler AG could be at risk because they produce in the U.S. luxury cars that are intended for the Chinese market. Chesbrough also said a U.S. tariff on flat screens that are made in China could raise the price of navigation and entertainment systems that are increasingly popular with domestic car buyers.
President Donald Trump has tried to downplay the risk of a trade war.
“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion,” he tweeted Wednesday. “We cannot let this continue!”
Trump added in a subsequent tweet: “When you’re already $500 Billion DOWN, you can’t lose!”