Long-suffering European auto stocks ripped higher on Monday as they headed for their best session in over two years following a late night tweet from President Trump claiming that China had agreed to lower its punishing 40% tariff on US-made cars. Ironically, shares of German companies like Daimler and BMW outperformed US auto stocks because many of the cars they export to China are manufactured in the US.
“China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%,” Trump said.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
Adding some confusion to the president’s claim, a top Chinese trade official declined to comment on the Trump tweet during a morning press conference, which failed to dent the upward momentum. Trump tweeted after China and the US agreed to a “temporary” 90-day trade truce where China agreed to buy more US agricultural products to try and help narrow its trade surplus with the US while Trump agreed to suspend a planned increase and expansion for US tariffs.
Beijing raised tariffs on U.S. auto imports to 40% in July, forcing many carmakers to hike prices in a major hit to the roughly $10 billion worth of passenger vehicles the United States sent to China last year. Last week, China called for a “negotiated solution” to the trade standoff, saying its tariffs on US-made cars would be only 15% if not for the trade spat (Chinese policy makers earlier this year had agreed to lower tariffs on US cars before the trade war erupted in the spring).
As Bloomberg pointed out, a reduction in Chinese tariffs would benefit Daimler and BMW more than US carmakers like General Motors and Ford, as the German luxury brands dominate the top 10 list of car imports to China.
Meanwhile, Chinese carmaker shares pared their gains, while shares of Chinese car dealerships climbed, as the threat of increased competition weighed on carmakers’ shares.
Elsewhere, Angela Merkel said around midday in Europe that a planned meeting between Germany auto company leaders and Trump on Tuesday wouldn’t focus on tariffs which probably means that the only thing they will take about is, you got it, tariffs.
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