China set to tax US-made car imports
By John Reed in London and Alan Beattie in Washington
China will impose retaliatory duties on US car imports in the latest sign of trade friction between the world’s two largest economies.

In a statement, China’s commerce ministry said on Wednesday that it was taking action in response to damage to its car industry from US “dumping and subsidies”. The move will affect several larger vehicles popular in China, including sport utility vehicles made by Germany’s BMW and Mercedes-Benz brands at their US plants. Shares of BMW and Daimler, which owns Mercedes, fell 5 per cent and 3 per cent respectively on Wednesday.

China overtook the US in 2009 as the world’s largest vehicle market, and sales there account for a substantial chunk of profits for BMW and Mercedes, who build the SUVs they sell globally in North America.

In addition to the two German premium brands, the ministry is also targeting models manufactured by General Motors, Ford Motor, Chrysler and Honda’s US unit. The individual duties will range from 2 per cent to 21.5 per cent and be imposed for two years on imported cars and SUVs with engines larger than 2.5 litres.

The move by China is unlikely to change the landscape in the country’s booming car market. Beijing has long imposed a hefty import duty – currently set at 25 per cent – on all foreign-made cars, regardless of country of origin.

Faced with that punishing tariff, most foreign automakers have already based production facilities in China for the vast majority of their cars sold to the Chinese market. GM, the foreign sales leader in China, uses Chinese factories to make nearly 99 per cent of its cars sold within China.

The move is however the latest in a flurry of legal actions between the US and China, in which each country accused the other of supporting domestic industry with illicit state subsidies and challenged each other’s use of emergency blocks on imports.

Last week the US said it was taking a case against China to the World Trade Organisation, arguing that Beijing’s use of anti-dumping measures against US poultry exports was illegal under global trade rules. Washington also has a similar WTO case pending against China for blocking steel imports from the US. “We are very disappointed in this action by China,” said Andrea Mead, a spokesperson for the US trade representative’s office.

China started the process of imposing anti-dumping duties on American poultry and cars in 2009, shortly after the US for the first time used a special measure to block imports of tyres from China. Beijing subsequently challenged the US’s action to block tyre imports at the WTO, but lost the case after a judicial panel ruled that Washington had acted correctly within the law.

“China can quickly initiate ‘surprise’ investigations in response to unilateral trade actions by the United States and other trading partners that it doesn’t like,” said Scott Lincicome, a trade attorney at White & Case.

Tim Reif, general counsel at the US trade representative’s office, recently told the FT that the poultry case was intended to constrain China’s use of emergency duties in the future: “China has been using antidumping and countervailing duties as a retaliatory measure. Part of the reason for bringing this [poultry] action is to prevent their use as retaliation.”

Carmakers on Wednesday sought to play down the impact on their business, pointing out that the new duties were lower than those in some other overseas markets. BMW, which makes its X3, X5 and X6 SUVs at a plant in Spartanburg, South Carolina, noted its models would be hit by a modest 2 per cent duty, compared to a 15 per cent penalty for Chrysler and 22 per cent for GM. “We are not counting on a major impact on our business in China,” the Munich-based automaker said.

Daimler said it was still studying the regulations. The German group produces its M-Class, R-Class and GL SUVs at a plant in Tuscaloosa, Alabama. China is Mercedes’ third-largest market after Germany and the US. Audi, owned by Volkswagen, does not build cars in the US. GM makes most of the cars it sells in China at local joint ventures, with imports accounting for less than 0.5 per cent of its domestic production in China. The Buick Enclave is among the models the US producer imports.

“GM and its partners are working with relevant authorities to understand the impact of the Chinese government’s decision to lift the suspension of anti-dumping and countervailing duties,” the US carmaker said, adding that it would “seek a solution consistent with a constructive global trade environment, which we believe is important to both China and the US”.

Ford said it would not be impacted by the tariff changes as it builds all of its Chinese vehicle portfolio locally, except for its Edge model, which it imports from Canada.

Catyrpelius wrote:Hmm could be a new economic cold war... I think its time we as the USA take our ball and go home and finally get around to building that wall I've been talking about.

I miss the days when you didn't screw with the country with the largest Navy.

notprop wrote:Hmm American prducts being taxed the same way Americans tax imports.

I say, this is just not cricket!

Gunboats....gunboats in Chinese hrbours is the only way to deal with this I think!

Seriously though why do the Chinese want American cars? There obviously too big to fit through all the cyclists.

Rented Tritium wrote:It's gonna get solved behind the scenes. It's definitely a statement about what we do to their imports. The gameplan is that they do this, we get all mad and we threaten something else, then in some talks somewhere they decide to meet halfway and china gets a better deal than they have now, but more reasonable than this.

It's just politicking. It's like when something crazy gets suggested to put pressure on a group to concede some totally unrelated point. We're seeing the outer layer of this only.

Melissia wrote:Yeah, China's rampant IP theft is just abhorrent, and is a good reason not to give them nay concessions to begin with. They practically have a government policy of stealing.

ShumaGorath wrote:

Melissia wrote:Yeah, China's rampant IP theft is just abhorrent, and is a good reason not to give them nay concessions to begin with. They practically have a government policy of stealing.

China has some of the most strict IP laws on earth. They're just very poorly enforced. Don't mix incompetency and corruption in with willful support of Piracy on a broad scale. That is unless you're talking about the Chinese sourced hacking efforts, those are pretty government enabled.

ShumaGorath wrote:China has some of the most strict IP laws on earth. They're just very poorly enforced.

Catyrpelius wrote:Hmm could be a new economic cold war... I think its time we as the USA take our ball and go home and finally get around to building that wall I've been talking about.

I miss the days when you didn't screw with the country with the largest Navy.

Frazzled wrote:

Rented Tritium wrote:It's gonna get solved behind the scenes. It's definitely a statement about what we do to their imports. The gameplan is that they do this, we get all mad and we threaten something else, then in some talks somewhere they decide to meet halfway and china gets a better deal than they have now, but more reasonable than this.

It's just politicking. It's like when something crazy gets suggested to put pressure on a group to concede some totally unrelated point. We're seeing the outer layer of this only.

Why do you think it will be solved? Has rampant IP theft in China been solved? Has Chinese currency, which is artifically low, been allowed to float? For that matter have any of these restrictions in Japan ever gone away?

US trade negotiators have an abyssmal track record.

dogma wrote:The cackling of WTO representatives could be heard round the world.

AustonT wrote:

Catyrpelius wrote:Hmm could be a new economic cold war... I think its time we as the USA take our ball and go home and finally get around to building that wall I've been talking about.

I miss the days when you didn't screw with the country with the largest Navy.

The last time I remember the US taking thier ball and going home it involved chickens and trucks. If you live in the US: when was the last time you saw a German pickup truck, and what year was it?

Catyrpelius wrote:

I miss the days when you didn't screw with the country with the largest Navy.

Ketara wrote:

Catyrpelius wrote:

I miss the days when you didn't screw with the country with the largest Navy.

Damn straight. Bring back Pax Britannia!