China will impose anti-subsidy and anti-dumping duties on imported cars made in the United States, China's Commerce Ministry said on Wednesday, the latest in a series of trade disputes between the world's two largest economies.
The duties will affect major U.S. auto makers General Motors
China's action comes at an awkward time for US-China relations, with China's currency and trade policies becoming a focus of criticism for U.S. presidential candidates and as China's growing diplomatic and military influence raises concern in the region and beyond.
The ministry said U.S.-produced cars and sport-utility vehicles (SUVs) benefited from subsidies and had been dumped into the Chinese market, causing substantial damage to China's domestic industry.
Vehicles that have engine capacity of 2.5 liters or more would be hit with duties ranging from 2.0 percent to 21.5 percent, it said. They will be imposed for two years from Thursday.
U.S.-China trade tension has been increasing in recent months, particularly in the solar industry, where tit-for-tat investigations into accusations of unfair practices have underscored leaders' warnings of rising protectionism amid gloomy global economic forecasts.
The auto duties could be a shot across the bow by China, fed up with U.S. complaints about its trade policies, rather than a major swipe at foreign auto makers.
We do not expect a significant impact on our business in China due to the duties. We are less affected than other manufacturers, and we are not unprepared for the measure, a BMW spokeswoman told Reuters.
Foreign car makers generally do not provide detail on how much of what they sell in China is imported, but analysts say that domestically produced cars account for the great bulk of their sales in the country.
The imported vehicles tend to be at the car maker's higher-end, more expensive models. General Motors, for example, imports some Cadillac and SUV models.
Under the new policy, anti-dumping duties on GM cars stand at 8.9 percent, with the rate for models made by BMW at a plant in the United States at 2.0 percent, the ministry said.
Chrysler will be hit with anti-dumping duties of 8.8 percent, with duties for other unidentified U.S. automakers set at 21.5 percent. Cars made by GM are also subject to a 12.9 percent anti-subsidy duty, while the rate for Chrysler models is 6.2 percent.
In 2009, China eclipsed the United States as the world's largest auto market, but its national car industry remains weak and fragmented, leaving 70 percent of the market to U.S., European, Japanese and, most recently, South Korean makers.
The duties may be a particular setback for Chrysler, which said in June it wanted to increase Chinese production through its majority shareholder Fiat SpA's joint venture with Guangzhou Automobile Group.
Before expanding local production, you typically try to increase market share with imports, said Georges Dieng, a Paris-based analyst with Natixis Securities.
So while this may not hurt Chrysler much in the short term, it could hamper their future plans.
Among European manufacturers, BMW has the most exposure to the new duties because its X-series models are made in the United States for the Chinese market.
Even so, the 2 percent tariff imposed on BMW imports is dwarfed by existing import duties and taxes, making it unlikely to affect sales significantly, Dieng said.
Clearly, the intention was to inflict pain on the Americans above all, Dieng said.
Ten years after China joined the World Trade Organization, experts say it is likely to become more deeply enmeshed in trade disputes.
More problems for Beijing at the trade governing body will be partly due to its ever-expanding trade footprint, but also because the moods of many of its trading partners are souring over what they see as state support for strategic industries.
Actions against those trade practices have led to what the U.S. ambassador to the WTO, Michael Punke, last month called an emerging pattern of China's reflexive resort to trade actions in response to legitimate actions taken by the United States or other trading partners.
The office of the U.S. Trade Representative (USTR) said it was very disappointed with the duties and would discuss a response with stakeholders and Congress.
We are very disappointed in this action by China. The United States has previously indicated that China's ... investigations of imports of automobiles from the United States appeared to have significant problems, USTR spokeswoman Carol Guthrie said in an emailed statement.
U.S. officials have said they are not satisfied with the way China is meeting its obligations in the WTO and would continue to step up its enforcement activity.
Chinese Commerce Minister Chen Deming said in late November the country was likely to fight back if other countries resorted to protectionism.
(Additional reporting by Wang Lan and Don Durfee in Beijing, Hendrik Sackmann in Stuttgart, Germany, Tom Miles in Geneva, and Laurence Frost in Paris; Editing by Ken Wills and Robert Birsel)