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Originally posted by CGVT
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Yet another gift on the trade front this week.
China's Finance Ministry said Tuesday that it will slash import tariffs on automobiles into the world's biggest car market in what could be the most significant step by officials in Beijing to placate demands of President Donald Trump to trim the country's multi-billion trade surplus with the United States.
China will cut the tariff to around 13.8%, the Ministry said, from the current level of 25%, while reducing the levy on imported car parts to 6% from 10%, in an effort to open the market further to foreign competition. The reductions will take effect on July 1, the Ministry said in a statement.
Volkswagen AG (VLKAY) , the world's second largest carmarker, rose 0.7% in Frankfurt trading following the statement as rivals BMW AG (BMWYY) (+1.6%) and Daimler AG (DMLRY) (+1.18%) outpaced the DAX performance index, which was marked 0.12% lower by mid-morning. The Stoxx 600 Automobiles and Parts Index, the sector benchmark, gained 0.53% in the opening 90 minutes of European trading.
Volkswagen sold more than 40% of the 2.511 million vehicles it delivered globally in the three months ending in March in the Chinese market, company reports indicate, compared to around 18% for BMW.
U.S. auto stocks were also on the rise, with Ford Motor Co. (F - Get Report) shares marked 1.4% higher in pre-market trading in New York, while rival General Motors Co. (GM - Get Report) gained 0.7%. The U.S.-listed share of Fiat Chrysler jumped 2.4%.
The moves come just days after officials in both Beijing and Washington said they would work to "significantly" reduce China's trade surplus, which hit a record $375 billion last year, following a weekend summit between the world's two biggest economies.
However, the reduction in auto tariffs -- which Trump famously described as "stupid" -- had been raised by China's President, Xi Jinping, earlier this year after a series of meetings with President Trump at his Mar-a-lago estate in Florida.
China said earlier this month that it would open it s market to foreign carmakers, saying it would lift caps on non-China ownership of joint ventures over the next five years.
The United States sold around $10.5 billion worth of cars to the Chinese market last year, according to Census Bureau data, but only took in $1.5 billion in reciprocal goods despite having only a 2.5% tariff on imported cars and parts. China's car market is also starting to slow, with first quarter growth coming in a 2.8%, according to the China Association of Automobile Manufacturers, which predicts only a 3% advance this year, notably slower than the 13.7% pace recorded in 2017.
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