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Signs that China plans to lower tariffs on imported vehicles to avert a potential trade war with the U.S. could help bolster the U.S.-based auto industry.
The stocks of General Motors, Ford, Fiat Chrysler and Tesla rose Tuesday after China President Xi Jinping signaled that the country could lower trade barriers to imported vehicles and bolster intellectual property rights.
Chinese sales of U.S.-made vehicles totaled about 266,657 in 2017, according to LMC Automotive, representing less than 1% of the world’s largest automotive market.
Xi’s comments follow a back-and-forth escalation of tariff threats with President Trump, who has bashed Chinese trade policy as unfair.
It’s too early to say whether Xi’s policy changes could bolster American jobs at factories that assemble vehicles for shipment overseas.
More: These 20 American cars exported to China could benefit from tariff cuts
More: China’s President Xi Jinping offers U.S. possible trade concessions
More: China files trade complaint against U.S. over steel tariffs
But Jeff Schuster, analyst for research firm LMC Automotive, said China’s moves could “facilitate an environment of investment and maximize efficiencies” for U.S. auto plants.
“The last thing the economy and auto sector needs is a trade war and it now appears that one is less likely,” Schuster said in an email.
The biggest winner could be German automakers that build luxury vehicles in the U.S. for export to China, analysts said.
That includes BMW and Mercedes-Benz maker Daimler, which already send vehicles from plants in the U.S. South to China. BMW shipped 106,971 vehicles from the U.S. to China in 2017, while Mercedes sent 71,198, according to LMC.
“The primary beneficiaries would be German carmakers and the German economy as a whole,” said Arndt Ellinghorst, auto analyst at investment research outfit Evercore ISI, in a note.
Ford Motor was the third largest U.S.-to-China exporter with a total of 45,145 vehicles in 2017, according to LMC. Fiat Chrysler was fourth at 16,545 and Tesla was fifth at 14,779. Tesla makes all of its vehicles at its plant in California.
The business case for a vehicle export strategy would get a boost from the shift in Chinese tariff policy, although it would still be more cost effective to build vehicles in China to avoid overseas shipping costs.
Currently, there’s a 2.5% tariff on cars shipped from China to the U.S. and a 25% tariff on cars shipped from the U.S. to China. Lowering the Chinese tariff would allow automakers to sell more foreign-made cars in the world’s largest vehicle market.
But most vehicles sold in China are built there. GM, Ford and other automakers have already established joint ventures with Chinese automakers to manufacture vehicles there, as required by law.
“Local production in China had to happen in order to sell in China,” said Rebecca Lindland, executive analyst at Kelley Blue Book.
Any change to that structure could be a welcome development for U.S. companies that must currently share 50% of their profits with their Chinese automaker partners.
After Xi’s remarks, Ford spokesperson Christin Baker said in a statement, “We are encouraged by his comments, and look forward to learning more.”
GM spokesman Patrick Morrissey reiterated the company’s clear and consistent position.
“We support a positive trade relationship between the U.S. and China, and urge both countries to continue to engage in constructive dialogue and pursue sustainable trade policies,” Morrissey said. “We continue to believe both countries value a vibrant auto industry and understand the interdependence between the world’s two largest automotive markets.”
To be sure, automakers have signed long-term deals with Chinese automakers and are unlikely to sever those ties anytime soon. It helps them to maintain local relationships.
The trade spat between China and the U.S. has been like “a game of chicken,” said economist Charles Ballard, a professor at Michigan State University.
“Often in a game of chicken, someone eventually changes course, and a fiery crash is averted,” he said. “It’s hard to predict how this will turn out, especially since one of the players is President Trump, who seems to thrive on unpredictability. But I am encouraged by signs that we might be able to step back from the brink, and avoid an all-out trade war.”
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.