One of the catalysts bolstering the overnight rally, which sent auto stocks surging both in the US and across the Atlantic, was a late night tweet by Donald Trump according to which “China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%” without giving any further details.
This however prompted even more questions about the outcome of his meeting with counterpart Xi Jinping as this was the first time that this aspect of the US-China trade agreement had been unveiled.
On Monday morning, Treasury Secretary Steven Mnuchin confirmed Trump’s tweet, saying that China has agreed to eliminate tariffs on imported automobiles but declined to give details.
“The first part was to reduce the surcharge, but yes there have been specific discussions on where auto tariffs will come down to, but I’m not prepared to talk about the specifics,” Mnuchin told reporters outside the White House, leaving the mystery intact.
A little later, Trump’s chief economic advisor, Larry Kudlow, told reporters that the Chinese are “going to roll back their auto tariffs,” adding “that’s got to be part of the deal” talking back Trump’s definitive assessment that China had agreed to “reduce and remove” (which is it?) auto tariffs.
Speaking later, Kudlow added some more confusion when he said that he “assumes” China will put car tariffs on the table right away, a statement that certainly does not imply China had “agreed” to anything.
Meanwhile, from the Chinese side, there was little mention of car tariffs being part of a deal. In fact, there was no mention at all: in a briefing in Beijing a few hours after the tweet, China’s foreign ministry spokesman Geng Shuang declined to comment on any car tariff changes.
As Bloomberg notes, the uncertainty about a deal on car tariffs stems from the unusual nature of the G-20 negotiation. The outcome of the talks wasn’t recorded in a joint statement, and so the two sides have instead emphasized different results. China hiked its tariff on U.S.-made cars to 40% earlier this year in retaliation for tariffs Trump imposed on Chinese imports, and Beijing has made no announcement about reducing the car tariff.
Last week, China said that tariffs on U.S. autos would be 15 percent if not for the trade dispute, and it called for a negotiated solution. Chinese officials discussed the possibility of lowering tariffs on U.S. car imports before Xi met Trump in Argentina. But the magnitude and timing of such a reduction were unclear, a Bloomberg source said.
The U.S. currently charges a 27.5 percent tax on imported cars from China.
Of course, any breakthrough in the auto tariff front would be widely cheered by the market: as both domestic and foreign carmakers have long pleaded for freer access to China’s auto market, while its own manufacturers are trying to expand abroad. In April, China announced a timetable to permit foreign automakers to own more than 50 percent of local carmaking ventures.
In summary, confusion continues to reign over whether the US and China struck some deal to “reduce and remove” tariffs, even if for now the S&P auto sector is happy to buy first and ask questions later.
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