China lowering auto tariffs is no 'breakthrough' in tense trade talks with US

Key Points
  • News that China is lowering tariffs on imported vehicles is a good step but a small one.
  • The vast majority of autos sold in China are made there, and the local industry will still enjoy considerable protection, said one analyst.

Auto tariffs cut to 15-percent in is a good start, former GM vice chair says

China's move to lower tariffs on imported autos and vehicle parts is a step in the right direction, but it's a tiny one.

The news China would lower tariffs on some imported vehicles by 10 percent drove shares of U.S. automakers Ford, GM and Tesla higher in Tuesday morning trading.

The decision is encouraging for both foreign automakers in China and those in the U.S. who want to level out the severe trade U.S.-China trade imbalance. But this is not a game-changing decision, say some industry observers.

"Reducing the import duty from 25 percent to 15 percent looks big on paper," said Michael Dunne, president of China-based auto consultancy Dunne Automotive. "But the domestic auto industry will continue to enjoy considerable protection."

In 2017, 97 percent of vehicles sold in China were built in China, he added. "The lower tariff might move that a few percentage points south, but that's all," Dunne said. "This is no breakthrough event."

Former GM Chairman Bob Lutz also called the move a "good start" but said he did not think it was going to have a big impact on U.S. exports. This in part because many major automakers, such as Ford and GM, already make vehicles in China through partnerships with local companies.

"I think it is a good halfway step, when you consider that our automotive tariffs in the United States for imports are 2½ percent," Lutz said Tuesday morning on CNBC's "Squawk Alley." "I would say they have got a way to go."

President Donald Trump has threatened to place tariffs on imports from China, which far outweigh U.S. exports in to the country. China has retaliated by announcing tariffs on some U.S. products. The moves have stoked fears of a trade war between the two countries.

Treasury Secretary Steven Mnuchin said on Monday trade talks have brought "meaningful progress" to the dispute.

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