China is going to suspend the additional import levy on vehicles from the US announced in August in an attempt to moderate the trade strains with the world’s largest economy. The suspension will start on 1 January and will last for three months, according to the Chinese Ministry of Finance.
Beijing lowers taxes on vehicles made in the US from the current 40 percent to 15 percent, in line with what other countries pay. Earlier this week, the news agency Bloomberg reported that China was considering reducing import duties on US products, a measure that US President Donald Trump already triumphantly announced in a tweet.
The temporary tax cut comes at a time when the country is confronted for the first time in 28 years with declining figures in terms of annual car sales. After decades of almost uninterrupted growth, car sales in China have shown a negative trend over the past six months.
Although the decline also has other causes, the trade war between the two economies certainly played a major role. The additional 25 percent import duty came into effect on 23 August and was the Chinese response to similar initiatives from the US. Washington said in early August that it was carrying an extra levy of 25 percent on 16 billion dollars (14 billion euros) on Chinese goods.
Good news for Tesla and German car manufacturers
The decision of Beijing is good news for American producers such as Tesla, but also German car builders such as BMW and Daimler sail as they introduce vehicles made in the US in China. In the long term, China itself also has much to gain from free trade in cars, now, Chinese manufacturers such as Guangzhou Automobile Group Co. and Geely Automobile Holdings Ltd have indicated that they want to cross the big lake. The United States currently charges 27.5 percent tax on imported cars from China.