What tariff does China impose on US autos?

By Alfonso Llanes on 07/26/2018 12:03

Trump has a lot of trouble with the facts often selecting in isolation whatever he feels like to make his point but that does not make a fact. For instance, on the issue of cars imported from China makes a case in point by singling out cars instead of a broader trade category of — motor vehicles or car parts — where the US tariff on light trucks from China is 25 percent.

China exports very few cars to the U.S. with a similarity that exists when comparing Chinese car exports to the European Union, Japan or South Korea.

Chinese tariffs on American auto parts sent to China are 10 percent tariff on automobile engines because U.S. firms ship auto parts to China to be assembled there.

It can be noted that this trade disparity stems in part from Trump’s decision to pull out of the Trans-Pacific Partnership simply because it was an Obama-era deal to lower trade barriers among a dozen countries, so, whatever tariff distortions which now exist could have been reduced or eliminated.


Trump said, “When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. When a car is sent to China from the United States, there is a Tariff to be paid of 25%.”Although the numbers are correct the reason is not for the disparity is not explained or included in Trump’s misleading statements.

China makes up a relatively small share of U.S. auto imports overall for it gives foreign automakers access to the Chinese automobile market as a big incentive to manufacture there and avoid import charges. However, China also requires foreign subsidiaries to operate as 50–50 joint ventures with Chinese companies. These arrangenment, of course, then become a learning curve for Chinese engineers to gain foreign technology and know-how. This cannot be considered the definition of “fair” trade, but it also ignores the logic to the existing situation.

The system came into play in 2001, after China joined the World Trade Organization. At the time, Chinese industry was much further behind America’s. The premise was that future rounds of WTO negotiations would lower China’s trade barriers, nevertheless, TPP was trashed by Trump and other global trade talks have stalled completely.

The auto sector is a case in point because current trade rules allow China to favor domestic production over imports while at the same time, it highlights tension between the interest of U.S. companies which want to invest in the Chinese market, and are more concerned with the investment rules governing where they stand to gain far more than if US firms produce the same cars in the domestic market for Chinese consumption never mind that the gain is at the expense of the US labor market. It was reported than in 2017–97 percent of vehicles sold in China were built in China.