President Trump Is Angry About How China Treats American Automakers. But the U.S. Is Actually Winning
President Donald Trump railed on Monday about Chinese tariffs on cars – pointing out the American cars are charged a 25% duty in China but Chinese-made cars are only subject to a 2.5% tariff in the U.S. (Shortly afterwards, Chinese President Xi Jinping responded by saying his country would lower import tariffs on vehicles).
“When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%,” Trump wrote on Twitter early in the morning. “When a car is sent to China from the United States, there is a Tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE – going on for years!”
It’s the second time the idea of Chinese car imports have crossed the president’s Twitter feed during his ongoing trade dispute with China – America’s largest trading partner. Trump’s tweet seems to mirror complaints Tesla CEO Elon Musk made last month about Chinese tariffs on U.S.-made cars.
But Trump’s focus on cars actually highlights one of the sectors where the U.S. maintains a large trade surplus with China, which would expand even more if China follows through in lowering the tariffs. It is perhaps no wonder that China has threatened to add automobiles to the list of American products that could face even greater tariffs in the fact of a trade wars.
The U.S. imported 58,000 passenger cars from China worth $1.5 billion last year, according to the International Trade Administration, a federal agency within the Department of Commerce. That was a fraction of the number of cars the U.S. exported to China: 267,000 passenger vehicles worth $9.9 billion.
Chinese-made cars made up just 0.76% of the $191.7 billion in new automobiles and light trucks that the U.S. imported in 2017, according to the International Trade Administration data. Canada, Mexico and Japan were the top exporters of cars to the U.S.
Volvo and General Motors both make cars in China and export them to the U.S. Ford plans to assemble some Focus sedans there, as well, Bloomberg reports. Those manufacturing plants have caused Chinese car exports to the U.S. to surge nearly 2,000% since 2013.
And despite Trump’s repeated calls for “reciprocal” tariffs – nations charging each other the same percentage for the same goods – Alan Deardorff, a professor of international economics at the University of Michigan, told Fortune that international trade has never worked that way.
“There’s nothing in trade law or trade customs to suggest that countries should have the same size tariff for each other’s exports of the same good,” Deardorff said. “That is not something that has ever been a guideline or standard in international trade.”
“Tariffs are a result of trade negotiations that take place multilaterally,” he added. “[Countries] negotiate a range of such reductions. They don’t try to keep their tariffs equal to one or another.”
Trump tweeted on Sunday that him and China President Xi Jinping “will always be friends, no matter what happens with our dispute on trade.” But given Trump’s increasingly hostile rhetoric towards Chinese trade policies, U.S. markets have been increasingly jittery over fears of an all-out trade war.
Countries the U.S. exports the most cars to
- Canada – 912,00 vehicles for $23.3 billion
- China – 267,000 vehicles for $9.9 billion
- Germany – 166,000 vehicles for $5.7 billion
- Mexico – 160,000 vehicles for $3.4 billion
- Saudi Arabia – 59,000 vehicles for $1.7 billion
Countries the U.S. imports the most cars from
- Mexico – 2.4 million vehicles for $46.9 billion
- Canada – 1.8 million vehicles for $42.5 billion
- Japan – 1.7 million vehicles for $39.8 billion
- South Korea – 929,000 vehicles for $15.7 billion
- Germany – 492,000 vehicles for $20.2 billion