China to Impose Retalitory Duties on US Made Cars from This Year

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Friction between China and the USA has always been high, but now the Chinese government has decided to impose new taxes on American made vehicles that have a displacement of 2.5L and above. The new tax comes as both countries accuse one another of introducing new taxes and laws to protect their domestic market and producers. Last week the Chinese government chose to take the USA to the World Trade Organization in a row over America’s poultry exports which China described as being illegal under WTO rules.

The new tax will be introduced from December 15th 2011 and will run until December 14th 2013, the tax is largely seen as a symbolic action by the Chinese government and could be seen as a warning shot to the USA that access to the world’s largest auto market could potentially be turned off. Sales of US made vehicles of 2.5L and above are rather low in China, although it does affect several foreign manufacturers that have their manufacturing and exporting facilities in the USA. The new duties will be from 2% to 22% depending on the amount of subsidies offered by the US government to manufacturers that export their product.

GM will be hit quite hard by the new tax as several of their models are made in the USA, the Chevrolet Camaro, Cadillac CTS and SRX SUV, and Buick Enclave are imported into the Chinese market. Although the Camaro is largely a niche product the Enclave SLX and CTS do register modest sales in the Chinese market, the CTS and SRX in particular are the main driving forces of the Cadillac brand in the Chinese market. GM will receive an anti dumping tariff of 8.9% and a 12.9% countervailing subsidy on its 2.5L and above models.

Jeep has only just started to see an improved sales figure in the Chinese market after entering the market as one of the first car manufacturers in China where the Cherokee became the first SUV and the only SUV worth owning in the Chinese market, however after a decade of mismanagement under the Beijing-DaimlerCrysler joint venture Jeep’s sales hit rock bottom. The introduction of the Wrangler, followed by the new Compass, Patriot and Grand Cherokee have given Jeep China a greater impetuous in the Chinese car market. The new taxes will have a limited effect on the new Compass and also Patriot but will give the Wrangler and the Grand Cherokee  a kick in the pants, likewise the Dodge JCUV (Journey) will also be affected by the tax but the Dodge Caliber will fly under the radar. Jeep will receive an anti dumping tariff of 8.8% and a 6.2% countervailing subsidy on its 2.5L and above models.

Ford’s sole North American import into China is the Ford Edge, although this is made in Canada so Ford is unscathed by this tax.

Foreign manufacturers with their manufacturing facilities in the USA will take a hit, Mercedes produces the ML, GL, and R series of SUV’s and MPV’s in the USA, Mercedes will receive an anti dumping tariff of 2.7% and a 0% countervailing subsidy on its 2.5L and above models.

BMW’s X3, X5 and X6 are made in the USA at their Spartanburg, North Carolina facility of course these models are all in excess of 2.5L so a 2% tax will be levied on the vehicles. BMW will receive an anti dumping tariff of 2% and a 0% countervailing subsidy on its 2.5L and above models.

Honda are hoping to further the Acura brand in China in 2012 in order to satisfy a growing luxury segment, however the majority of their China sales come from US made cars, the RL, TL, MDX and ZDX will be affected by the new tax. Honda will receive an anti dumping tariff of 4.1% and a 0% countervailing subsidy on its 2.5L and above models.

The new tariffs will not make a huge wave in the Chinese car market, Chinese luxury car buyers are unlikely to be put off buying American made cars by the additional percentages added to their car prices, in fact GM are already pushing to produce Cadillac’s most popular model, the SRX SUV, in China  and Jeep are expected to put their current model range into production with Guangzhou Auto in the very near future.