Even some German cars made in the U.S., like the Mercedes-Benz M-Class, will be facing duties.
The threat of a trade war appears to be looming large with China’s warning that it plans to impose anti-dumping duties on American automobiles – a move that could have a particularly harsh impact on General Motors, the largest manufacturer in the booming Chinese auto industry.
But slightly smaller new duties also will be imposed on products exported to China by Chrysler, as well as from U.S. plants operated by BMW and Mercedes-Benz.
The Chinese announcement comes three months after the World Trade Organization (WTO) upheld the U.S. decision to impose duties on Chinese tire imports – and some see the move as a warning to Washington where further actions are under debate to nudge China into letting its currency rise closer to free market levels.
The new tariffs will affect vehicles with engines larger than 2.5 liters in size, and would range from 2.0% on BMW models and 2.7% on Mercedes, to 12.9% for GM products imported from the U.S. Chrysler would face an 8.8% tariff, according to the Chinese Ministry of Commerce.
“The impact to overall Chinese auto sales…would be limited,” said an analysis by Deutsche Bank, which noted that all imported vehicles account for less than 1 million units a year, or barely 5.5% of the total Chinese market. And even then, the tariffs are focused on larger, more expensive models “in which consumers tend to be less price-sensitive” anyway.
The Chinese have been expected to strike back after losing an appeal to the WTO in September challenging President Barack Obama’s imposition of a 35% tariff — generating a collective $1.8 billion — on auto and light truck tires produced in China. That move, in September 2009, was intended to protect American tire manufacturers from an anticipated flood of Chinese-made products.
An official with BMW described the trade flap as regrettable. Both BMW and Mercedes-Benz have been investing heavily in their American operations and have been using them as an increased base of production for markets around the world, taking advantage of the weak U.S. dollar.
The decision to target the American auto industry seems to be more than just a random way of fighting back against U.S. trade moves.
The auto industry has been the engine of Chinese growth, in recent years, and it is now the single largest national automotive market in the world. But the double-digit growth of the past decade – sales rising 32% last year alone — has begun to wane. In fact, data from the China Association of Automobile Manufacturers suggests that the market’s growth will actually fall behind that of the recovering American market for 2011 – the first time that has happened since 1998.
With inflation and the end of government incentive programs putting on the brakes domestic Chinese makers are in a particularly vulnerable position, even as foreign giants like GM continue to expand their own operations in China. A number of the estimated 200 local Chinese brands are expected to shake out in the next few years – though others are hoping to become global players, targeting opportunities in the U.S. and Europe.