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Trump trade war: China considering promised auto tariff cut on US cars

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The Chinese government is set to consider a reduction of tariffs on US cars and trucks according to a new report, in a move that could help deescalate trade tensions between the US and China.

Bloomberg reported Tuesday that a proposal to cut China’s tariffs on US autos from the current 40% to the 15% paid by other nations was submitted to China’s cabinet and could be reviewed in the next few days.

While no final decision has been made, according to the report, the move would fulfill a promise touted by President Donald Trump in the days following his meeting with Chinese President Xi Jinping at the G20 summit.

“China has agreed to reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40%,” Trump tweeted on December 2, the day after a dinner with Xi in Buenos Aires, Argentina.

The tweet was met with confusion as neither the US nor the Chinese included the auto tariff cut in their post-dinner statements on the agreements the two leaders reached.

Over the following few days, Trump advisers began to backtrack on the president’s promise, saying that no deal had been formally reached to bring down the auto tariffs.

Read more: Trump is losing the trade war with China based on his favorite report card, and it’s probably going to keep getting worse»

But it appears that Beijing is trying to appease Trump by dropping the tariffs, an important move as $10.5 billion worth of new and used cars were shipped from the US to China in 2017. According to China’s Passenger Car Association, 10% of the country’s total 2017 car imports were from the US.

Automakers with major US operations also reported disruptions due to the tariff increase. For instance, Ford saw sales in China dive after the tariffs were increased in July. Additionally, China-bound shipments of BMW models made in South Carolina also tanked.

Read more: We just got a new sign that the pain from Trump’s trade war is getting worse, and it’s spreading to even more businesses like restaurants»

Reducing the tariffs would also give Trump a major win in the trade negotiations, which could help bolster the president’s argument for the tough tactics used against China.

Despite the Trump team’s insistence that the goal was to get auto tariffs down to 0%, Beijing would be unable to do so just for the US as World Trade Organization rules would require it to lower the tariff for all nations to zero. Fifteen percent is China’s “most favored nations” level currently paid by all other nations when shipping to China.

Following the news, shares of US automakers ticked higher in premarket trading.

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