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Chinese traders in American cars find temporary relief in trade war truce

Chinese traders in American cars find temporary relief in trade war truce

In the northeastern Chinese port city of Tianjin, grey market traders of American-made cars, badly stung by the US-China trade war and punitive tit-for-tat tariffs, are scrambling to take advantage of an opportunity they fear may prove only temporary.

At a car “supermarket” near the city’s busy harbour, importers said they were rushing to get “Made in America” cars through customs and revving up orders after Beijing temporarily cut tariffs on US cars from January 1.

The grey market trade in Tianjin is only a part of China’s car market, the world’s largest, but it gives an important insight into the imported car trade.

While carmakers prefer importing their own vehicles, Beijing has been encouraging alternative channels, fuelling a growth in the grey market.

This grey market channel made up roughly 14 per cent of all imported cars in China in 2017, almost double the 7.7 per cent in 2014, according to data from China’s biggest car importer, Sinomach Automobile Co Ltd.

Tianjin is the biggest port in China in terms of parallel car imports, bringing in around 70 per cent of the country’s overall parallel car imports, according to a commerce ministry report.

Dealers estimate there are more than 10,000 US-made cars sitting in the port’s bonded zones.

With no guarantee the lower tariff window would not close again at the end of March, firms were rushing to bring cars in, dealers and industry insiders said.

The activity at the port – after a freeze since China hit US car imports with a 40 per cent tariff last July – illustrates how ebbs and flows in the protracted trade war between Washington and Beijing are impacting global businesses.

“Our business was harshly hit in 2018. Sales fell steeply and we were forced to hold cars in bonded zones to wait for tariffs to be cut,” said Kevin Li, a dealer at the port whose firm brings in US-made luxury SUVs.

“Now we are discussing with dealers in the US to start importing more cars once again.”

The higher tariffs have hit premium carmakers which manufacture in the US and export a large proportion of the vehicles they sell to China, including Tesla, Ford’s Lincoln brand, and Germany’s BMW and Daimler, which both have manufacturing facilities in the United States.

Chinese and US trade negotiators have been locked in talks in Beijing this week in a bid to end the trade tensions that have rocked markets. Those talks wrapped up on Wednesday, with hopes growing that a deal could be struck.

The two countries’ leaders declared a 90-day trade truce last month after talks on the sidelines of the G20 meeting in Argentina, which saw China’s steep levies on cars trimmed back for a three-month period until the end of March.