Xi promised to “significantly lower” tariffs on auto imports.
In a speech on Tuesday, Chinese President Xi Jinping announced the country will open its markets and slash tariffs on auto import.
It appears to be a concession to President Donald Trump, who has threatened tariffs on Chinese goods, which has led to fears of a trade war.
Xi did not mention Trump in his speech, but he promised to open China’s markets “and improve conditions for foreign companies.” Fox News continued:
“We will take the initiative to expand imports,” Xi said during his keynote speech at the opening of the Boao Forum for Asia, China Plus News reported. “China does not seek trade surplus; we have a genuine desire to increase imports and achieve greater balance of international payments under the current account,” he said.
Xi said Beijing will “significantly lower” tariffs on auto imports this year and ease restrictions on foreign ownership in the auto industry as soon as possible.
China charges total duties of 25 percent on most imported cars — a 10 percent customs tariff plus a 15 percent auto tax. Since December 2016, Beijing also has charged an additional 10 percent on “super-luxury” vehicles priced above $200,000.
The U.S. bought more than $500 billion in goods from China last year and now is planning or considering penalties on some $150 billion of those imports.
CNBC said that Xi described “China as a benevolent leader of the global economy, emphasizing that open systems are the best course of action for the world.” Man, us libertarians have been saying that years! CNBC continued:
“We must refrain from seeking dominance and reject the zero-sum game, we must refrain from ‘beggar thy neighbor’ and reject power politics or hegemony while the strong bully the weak,” Xi said.
Instead, he said, countries should “stay committed to openness, connectivity and mutual benefits, build an open global economy, and reinforce cooperation within the G-20, APEC and other multilateral frameworks. We should promote trade and investment liberalization and facilitation, support the multilateral trading system.”
“This way, we will make economic globalization, more open, inclusive, balanced and beneficial to all,” he added.
Bloomberg noted that many watched Xi’s speech due to an impending trade war, but also because China has long promised to open its markets and yet went the other way with “more centralized control, market-access barriers and state support for local companies.”
Trump proposed $150 billion in tariffs on Chinese goods. The administration asked China “to reduce its trade surplus by $100 billion, cut tariffs on cars and stop forced technology transfers by foreign corporations, among other things.”
It looks like China still has some work to do. Bloomberg Economics Chief Asia Economist Tom Orlik said America “will likely want to see deeds, not just words, before it considers softening its protectionist stance.”
He’s probably right considering, as I wrote above, China has said this before. Actions do speak louder than words. But are these words just hot air?
— Scott Lincicome (@scottlincicome) April 10, 2018
On Bloomberg Gadfly, David Fickling and Anjani Trivedi remind us how many cars China imports:
China imports just over 1 million cars into its 20 million-a-year-plus auto market. Of that amount, most are German-branded luxury SUVs. Nomura Holdings Inc. analysts estimate General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV exported around 50,000 to 60,000 cars from the U.S. to China last year worth around $2 billion, versus the more than 150,000 luxury SUVs that BMW AG and Daimler AG sent from their U.S. factories.
It’s cheaper for the companies to build cars in China than in North America, which means the “makers of prestige vehicles whose volumes aren’t large enough to justify a local plant” will likely benefit the most from “lower import taxes.”
Xi’s speech has helped the U.S. stock market, which took a dip after Xi and Trump engaged in a heated rhetorical exchange on tariffs. From The Wall Street Journal:
The Dow Jones Industrial Average rose 369 points, or 1.5%, to 24348. The S&P 500 climbed 1.3%, and the technology-focused Nasdaq added 1.4%.
Tech stocks were among the best performers in the S&P 500, rising 1.4%. Apple shares climbed 1.7%, while Microsoft added 1.5%. Shares of Facebook were the outlier, falling 0.1%, ahead of Chief Executive Mark Zuckerberg’s scheduled testimony about the social-media company’s handling of personal user data later Tuesday.
Gains for U.S. stocks came as the Stoxx Europe 600 climbed 1.7%. Asian stocks also rose after the Chinese president pledged to significantly broaden market access this year.
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