China to reduce auto import tariffs; open up economy further

Dianna Christensen
April 10, 2018

The U.S. move last week to threaten China with tariffs on $50 billion in Chinese goods was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfer from U.S. companies.

The U.S. S&P 500 E-mini futures gained 1.01 percent, suggesting U.S. shares would open positively later on Tuesday.

The comments from both countries followed a week of escalating tariff threats sparked by United States frustration with China's trade and intellectual property policies, worrying financial markets over potential damage to global growth.

Speaking at the Boao Economic Forum in China, Xi pledged to "significantly lower import tariffs" for vehicles and "significantly broaden market access" for foreign companies, the Washington Post reported.

President Xi Jinping vowed on April 10 to take new steps to open China's economy "wider and wider" amid a broiling trade confrontation with the United States.

China warned on Friday it was fully prepared to respond with a "fierce counter strike" of fresh trade measures if Trump imposes the additional $100 billion in tariffs.

Fund managers argue that the steel and aluminum on which the USA has announced tariffs are a tiny proportion of China's exports.

"China created this problem, and the president is trying to put pressure on them to fix this, and take back some of the awful actions that they've had in the last several decades", said White House press secretary Sarah Huckabee Sanders during the daily briefing Friday. China responded in-kind, announcing their own 25% tariff on about $50 billion of additional USA products including soybeans, cars, and chemicals.

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Neither the US nor the Chinese tariffs have actually gone into effect, leaving open the possibility that the Trump administration is trying to establish a bargaining position for a future negotiation. The Chinese government has much more control over its economy than the US, which would allow it to protect the public from factory closings or job cuts by forcing banks to support the industries hit by American tariffs.

The latest annual survey from the American Chamber of Commerce in China found that its members "continue to feel foreign business are less welcome in China than they once were". Even after that, it's not clear when the tariffs would be applied. That was a fraction of the number of cars the USA exported to China: 267,000 passenger vehicles worth $9.9 billion.

"Ultimately U.S. industry will be looking for implementation of long-stalled economic reforms, but actions to date have greatly undermined the optimism of the U.S. business community", Jacob Parker, vice president of China operations at the U.S. Even worse, China dwarfs all other countries for American soybean buyers, purchasing about 60 percent of all US soybean exports.

As a proxy for trade war concerns, there are few better financial indicators out there than movements in the Australian dollar-Japanese yen cross. However, such harsh measures by the United States are unlikely on the political ground as any such possible move could bring India and China closer.

According to Kenny Yee, Rakuten Trade Sdn Bhd's head of research, sectors that are predominantly domestic-driven will be spared from the negative effects of a trade war if it escalates.

"We still believe... that this will be one of the possible "carrots" that China will present in line with various "stick" threats".

USA crude rose 2.82 percent to $65.21 per barrel and Brent was last at $70.68, up 2.96 percent on the day.

China charges total duties of 25 percent on most imported cars - a 10 percent customs tariff plus a 15 percent auto tax.

Other reports by GlobalViralNews

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