China’s 10% Tariff on US Cars Hits GM, Ford SUVs
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China’s 10% additional tariff on vehicles with larger engines imported from the U.S. took effect Feb. 10 as the two countries failed to reach a deal over the Trump administration’s blanket levy on Chinese goods.
The extra tariff went into effect Feb. 10 against goods including vehicles with engines larger than 2.5 liters, according to Chinese state broadcaster CCTV, bringing the total impost to 25%.
Exports of such vehicles are tiny relative to the number of cars that companies including General Motors Co. produce locally with joint venture partners. Manufacturers shipped about $3.1 billion worth of vehicles with larger engines from the U.S. to China last year, according to customs data.
The additional tariff will apply to automakers including GM and Ford Motor Co., which are already struggling in China as local drivers switch to electric cars made by domestic manufacturers led by BYD Co. GM last year flagged more than $5 billion in charges and writedowns tied to its troubled China operations.
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Michael Dean, Bloomberg Intelligence automotive analyst, said, “Mercedes — and to a lesser extent BMW — are modestly exposed to China’s retaliatory incremental 10% tariff on SUVs and pickups imported from the U.S. Both German brands have made the U.S. their global production hubs for SUVs, yet since 2022, the high-margin BMW X5 has been produced locally. For Mercedes, the additional tariff may reduce Ebit by 1.5% in 2025, without mitigating factors such as raising prices (made harder given an average discount to list price is already about 15% for SUVs).”
In a bid to appeal to wealthy Chinese buyers, GM launched a premium import service called Durant Guild in 2022 offering vehicles such as the GMC Yukon and Chevrolet Tahoe sport utility vehicles. Both are powered by engines that are 3 liters or more.
However, as with the tariffs Trump threatened to impose on Canada and Mexico before delaying them after talks with the countries’ leaders, the situation could be fluid. Trump has said he will soon hold a call with Chinese President Xi Jinping, and China’s Ministry of Foreign Affairs has also urged dialogue and consultation to ward off a full-scale trade war.
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