- Trump Administration considers adding a 25% tariff on Chinese car imports.
- China retaliates with an equal 25% of 106 U.S. imported goods.
- Tesla Inc. is already paying 25% due to China’s tariff on car imports.
China has been the most prominent trading partner of the United States for some time now. NBC News states that the trades between U.S. and China have been estimated at a sum of $648.2 billion in the past year. However, President Trump has expressed his desire – through Twitter – to cut off ties with nations that are trading with North Korea and that includes China.
The United States is considering, in addition to other options, stopping all trade with any country doing business with North Korea.
— Donald J. Trump (@realDonaldTrump) September 3, 2017
According to Bloomberg, China could be facing a 25 percent import duty on cars sold to the United States ordered by Trump administration. With the imported goods estimated at a worth of some $50 billion, China is looking at a customs duty of about $12.5 billion.
Statistics have shown that there have not been many Chinese car imports in the United States as of now, although it has been on the rise. At the moment, Chinese car imports include Volvo’s S60 sedans, led by its parent company, Geely Automobile Holdings Ltd. In addition, there are also General Motors Co.’s Buick Envision SUV and Cadillac CT6 plug-in hybrid. Nonetheless, these motor vehicles were only sold in small amounts.
Autodata Corporation reports that only seventeen Cadillac CT6s were sold within the past month. On top of that, there were only 4,367 Buick Envision SUV purchased across the States within the same time frame. That contributes to a trifling 1.5 percent of the General Motors Co.’ aggregate sales.
In light of these events, Jeff Schuster, the Senior Vice President of Forecasting for LMC Automotive has expressed his views on the matter.
“At this point, the decision would put on hold any plans to import cars… it’s really a ploy to get the Chinese to the table.”
In response, China is giving as good as one gets. Almost immediately, China strikes back with the same 25 percent customs duty of over one hundred United States’ imported goods, ranging from soybeans to aircraft. This could be detrimental to Elon Musk’s Tesla, according to Ben Kallo, an analyst at Robert W. Baird & Co. He asserts that nine percent of Tesla Inc.’s revenue in 2018 is completely reliant on its exports to China. Cui Dongshu, the secretary general of China’s Passenger Car Association has explained the problem Tesla Inc. is facing.
“The jump in tax levy hurts Tesla the most as it had not yet started local production in China. For GM and Ford, they can always make up with China-produced ones.”
At present, Tesla Inc. is already paying a 25 percent import tariff set by China. As such, Tesla’s Model X and Model S are already considered as luxurious vehicles in China. If the trade war between China and America continues to persist, it would only result in the downfall of Tesla. These cars will only be within the price range of the richest individuals amongst Chinese buyers.
Evidently, Elon Musk himself has communicated his opinions to the President via Twitter.
For example, an American car going to China pays 25% import duty, but a Chinese car coming to the US only pays 2.5%, a tenfold difference
— Elon Musk (@elonmusk) March 8, 2018
He voices his discontent with China’s current import duty on cars and believes that the playing field should be even. This means that he is in complete consonance with the decision made by Trump administration.
The American Center for Mobility is a test site for autonomous cars located in Ypsilanti, Michigan. At its launch on Wednesday, Michigan’s Congresswoman Debbie Dingell, a Democrat, on the other hand, has voiced her concern over the possible outcome of this move.
“We need to have a level playing field, but we need to make sure that there are not unintended consequences.”
Nevertheless, the decision has yet to be finalized as they await bargaining with China.
Perhaps the only beneficiary of the possible tariff are the automobile manufacturers within the States. This is because the number of car imports from China in the future will be held back by the 25 percent tax, which in turn reduces the competition in the U.S. market for local automakers.
Will the 25 percent tariff be implemented by both nations? How will this affect Tesla Inc., which is already facing troubles of its own in recent times?
Featured image via flickr/ Automobile Italia