China suspends tariff hikes on $126bn of US cars, auto parts

Updated December 15, 2018

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Suspension is China’s first step in response to President Donald Trump’s agreement to suspend US tariff hikes. — File photo
Suspension is China’s first step in response to President Donald Trump’s agreement to suspend US tariff hikes. — File photo

BEIJING: China announced a 90-day suspension on Friday of tariff hikes on $126 billion of US cars, trucks and auto parts following its cease-fire in a trade battle with Washington that threatens global economic growth.

The suspension is China’s first step in response to President Donald Trump’s Dec 1 agreement to suspend US tariff hikes for a similar 90-day period while the two sides negotiate over American complaints about Beijing’s technology policy and trade surplus.

China has indicated it plans to move ahead with the talks despite strains over the arrest of a Chinese technology executive in Canada to face possible US charges related to a violation of trade sanctions on Iran.

Beijing will suspend a 25 per cent import charge on $66bn of cars and trucks and a 5pc charge on $60bn of auto parts, effective Jan 1, the Finance Ministry announced.

The announcement helped give substance to Trump’s agreement with his Chinese counterpart, Xi Jinping, after prolonged uncertainty caused jittery global financial markets to swing wildly.

The Chinese penalties were imposed in response to Trump’s decision to slap 25pc tariffs on $50bn of Chinese goods and a 10pc charge on another $200bn. The second tariff was due to rise Jan 1 until Trump agreed to the postponement.

The United States and other trading partners complain that Beijing steals or pressures companies to hand over technology in violation of its market-opening obligations. American officials also worry Chinese industry plans that call for state-led creation of global champions in robotics and other fields threaten US industrial leadership.

A spokesman for China’s Commerce Ministry, Gao Feng, said Thursday the two sides were in “close contact” but gave no timetable for possible face-to-face negotiations.

Economists say 90 days probably is too little time to resolve conflicts that have bedeviled US-Chinese relations for years. They say Beijing’s goal probably will be to show it is making progress so Trump extends his deadline.

Beijing officials expressed confidence China could withstand US pressure but the fight battered consumer confidence and threatened export industries that support millions of jobs.

Friday’s announcement “shows the Chinese government is willing to solve trade disputes through consultation based on equality,” said Song Lifang, an economist at Renmin University in Beijing.

The tariff cut lowers the charge for US-made cars and trucks to 15pc, the same level as imports from other countries.

“If the United States cuts or remove tariffs on Chinese goods, China will surely follow up with further relevant measures,” Song said.

Published in Dawn, December 15th, 2018