Shares of German carmakers Daimler AG and BMW AG rallied Monday morning after the U.S. trade deal with China. Trump’s comments, if ratified, would also hand automakers like Tesla Inc. a potential reprieve after higher levies hit sales in the world’s biggest car market.
China said last week that tariffs on U.S. autos would be 15 percent if not for the trade dispute, and it called for a negotiated solution. Chinese officials discussed the possibility of lowering tariffs on U.S. car imports before Xi met Trump in Argentina, according to a person familiar with the situation who asked not to be identified. But the magnitude and timing of such a reduction were unclear, the person said.
The U.S. currently charges a 27.5 percent tax on imported cars from China.
The trade war has taken a toll on car companies that manufacture in the U.S., with the makers of Mercedes-Benz and its rival BMW both warning of lower profits this year as tariffs forced them to hike prices in China. Car sales in the world’s second-biggest economy declined for a fifth consecutive month in October, bringing the market closer to its first annual drop in at least two decades. That’s piled pressure on auto companies that have relied on the country for growth amid declining car sales in the U.S.
Tesla didn’t respond to an email seeking comment while BMW declined to comment.
Boost to Germans
The tariff reduction benefits Daimler and BMW more than U.S. automakers such as General Motors or Ford Motor Co. That’s because the German luxury brands dominate the top 10 list of vehicle imports into China.
“China isn’t giving away that much as German automakers like BMW and Daimler benefit the most,” said Janet Lewis, an analyst at Macquarie Capital Securities in Tokyo. “Longer-term, China has more to gain from free trade in autos,” with local Chinese manufacturers such as Guangzhou Automobile Group Co. and Geely Automobile Holdings Ltd. looking to move overseas, she said.
“If China cancels tariffs on high-end imported cars, that should benefit dealerships as the prices will be lower,” said Angus Chan, a Shanghai-based analyst with Bocom International.
Of China’s $51 billion of vehicle imports in 2017, about $13.5 billion came from North America, including sales of models made there by non-U.S. manufacturers like BMW. China imported 280,208 vehicles, or 10 percent of total imported cars, from the U.S. last year, according to China’s Passenger Car Association.
U.S. exports of cars and light trucks to China were worth $9.5 billion in 2017 and have dropped off significantly since China imposed its retaliatory tariffs over the summer that gave exporters in Europe and Japan a significant advantage.
Foreign carmakers have long pleaded for freer access to China’s auto market, while its own manufacturers are trying to expand abroad. In April, China announced a timetable to permit foreign automakers to own more than 50 percent of local carmaking ventures.
Mnuchin told reporters Monday that the U.S. got a “strong commitment” from China to deal with currency devaluation. He said the U.S. is concerned about the weakening of the yuan and that administration officials have discussed the issue with China over several months.
“I’ve had direct discussions over the last several months with the governor of the Peoples’ bank of China,” Mnuchin said. “These discussions we had with the vice premier and we had discussions with President Xi and President Trump and there is a strong commitment from China to deal with this issue and make sure they don’t continue to devalue the currency.”