China Threatens Taxing American Cars Over Trade Dispute

In response to the United States President Donald Trump proposing a tariff of $50 billion on imports from China to the United States, China has responded by threatening to do exactly the same. The United States President had included several components that are used by the auto industry in the list of taxable items, including the likes of transmissions, catalytic converters and lithium ion batteries. The increase in tax on these crucial automotive components would have in turn made them more expensive and in turn made automobiles more expensive in the United States too, forcing American automakers (and automakers with American assembly facilities) to look inward to American suppliers.

China has responded with a proposal that has suggested similar taxes and tariffs on cars coming from the United States to China and on American products in China in general. The American automakers rely massively on the Chinese market for their sales. Ford for example sold 8.3 lakh vehicles in China in 2017 while General Motors sold over 40 lakh vehicles - a huge part of its overall global sales. FCA group also saw huge increase in sales for its Jeep brand with over 2 lakh units sold.

Although these new taxes and tariffs haven't come into play just yet, this trade war between the two super powers could affect the automotive market as a whole the world over. Increase in taxes and prices for Chinese automotive components that are used globally will most certainly have a direct effect on prices. The increase in battery prices for example will directly affect automakers the world over - especially Tesla - which sources all its battery technology from China. On the flipside, automakers like the Volkswagen Group could capitalise if this so called trade war becomes a reality.