FACT CHECK: Trump’s Tweet on Chinese Car Tariffs
President Donald Trump said in a tweet Monday that the U.S. has only a 2.5 percent tariff on cars while China has a 25 percent tariff on cars.
When a car is sent to the United States from China, there is a Tariff to be paid of 2 1/2%. 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!
— Donald J. Trump (@realDonaldTrump) April 9, 2018
“Does that sound like free or fair trade. No, it sounds like STUPID TRADE – going on for years!” he said.
The Chinese base tariff on cars is 25 percent, and the U.S. tariff on cars is 2.5 percent. The U.S. tariff on trucks is 25 percent, though, and China imposes many additional duties and taxes on imported vehicles depending on the model and brand.
Trump’s tweet highlights heated trade disputes between the U.S. and China. Last week, his administration proposed a 25 percent tariff on 1,300 goods from China, including some types of vehicles and car parts. The U.S. Trade Representative is accepting comments on the proposed increase until May 22.
In retaliation, China said that it would add tariffs of 25 percent on 106 American goods, including many cars. That is in addition to new tariffs that China announced on 128 products, including pork and nuts, just days before. But on Tuesday, Chinese President Xi Jinping said that Beijing will “significantly lower” tariffs on vehicle imports this year.
Not all vehicles are subject to the same tariff rate, though. The U.S. tariff on trucks is 25 percent. China imposes additional anti-dumping duties ranging from 2 percent to 21.5 percent on some car brands and models, and brands like General Motors and Chrysler are subject to countervailing duties of 6.2 percent or 12.9 percent intended to offset subsidies.
Vehicles imported into China are subject to a consumption tax, depending on size, ranging from 1 percent to 40 percent. The Chinese tariff on automobile parts, rather than completed vehicles, is about 10 percent.
The current Chinese tariff rate on vehicles went into effect in 2006. Chinese state media reported that cars tariffs for some cars reached 220 percent in 1986, but have been steadily lowering since. The Global Times, a Chinese newspaper, also argued in an op-ed that when taking China’s free trade zones into consideration, the average weighted tariff for all imports is much lower.
Cars sold in both countries are subject to additional sales taxes that are not specific to imports, with China’s being much higher. U.S. state and local sales taxes reach 10 percent in some areas, while some states do not have a sales tax at all. China charges a 17 percent value-added tax and a vehicle purchase tax of 10 percent.
“Another Chinese market access restriction is requiring a joint venture with a Chinese firm in order to sell cars within China,” Derek Scissors, resident scholar at the American Enterprise Institute focusing on U.S. economic relations with China, told The Daily Caller News Foundation in an email. “What happens in these joint ventures, of course, is that Chinese partners absorb know-how from foreign companies and become better competitors.”
Despite the high barriers to entry, the U.S. still exports far more completed vehicles to China than it exports to the U.S. China is the second-largest recipient of U.S. passenger vehicle exports after Canada, taking in $9.9 billion worth of vehicles in 2017. Only $1.5 billion of the $191.7 billion in passenger vehicles imported by the U.S. in 2017 came from China – less than 1 percent.
Scissors said that this discrepancy shows that “tariffs do not determine everything in trade.”
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