China is temporarily removing the retaliatory tariff it imposed on cars made in the United States.
U.S. cars will still face the 15 percent tariff imposed on all cars imported into China. But according to a statement released by China’s Finance Ministry on Friday, the punitive 25 percent additional tariff China imposed on U.S.-made cars will be suspended for three months beginning January 1.
The move is part of an effort by China to convince Trump administration officials that the country is willing to compromise to reach a trade deal with the U.S. China dictator Xi Jingping and President Trump agreed to a 90-day tariff truce during a dinner in Buenos Aires on December 1.
China does not purchase a lot of manufactured products from the U.S., which has limited the effects of its tariffs. Last year, before the auto tariff rose to 40 percent, U.S. automobile exports to China amounted to $9.5 billion last year, according to the U.S. Department of Commerce. That makes it the third highest category of goods imported from the U.S., behind agricultural products and aerospace goods.
On top of the 15 percent tariff, buyers of cars in China must pay a 16 percent value added tax. Auto industry insiders say that the combined effect of the value added tax and the tariff make imported cars far too expensive for all but the wealthiest Chinese buyers.
Senior U.S. officials learned about the tariff reduction from a phone call from Chinese trade negotiators. President Trump announced the tariff reduction in a tweet.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
Even with the removal of the retaliatory tariff, China’s tax on imported cars will be far from reciprocal with the U.S., which charges just a 2.5 percent tariff on auto imports. President Trump has repeatedly said he wants trade relations between the U.S. and other countries to be reciprocal.