China will cut the import duty on passenger cars to 15%, further opening a market that has been a chief target of the U.S. in its trade fight with the world's second-largest economy.
The Finance Ministry said Tuesday the levy will be lowered effective July 1 from the current 25% that has been in place for more than a decade, boosting shares of automakers from India to Europe. Bloomberg News reported last month that China was weighing proposals to reduce the car import levy to 10% or 15%.
A reduction in the import duty follows a truce between the Trump administration and Chinese officials as they seek to defuse tensions and avert an all-out trade war. While the levy reduction could be claimed in some quarters as a concession to President Trump and will be a boon to U.S.
carmakers such as Tesla Inc. and Ford Motor Co., the move also will benefit European and Asian manufacturers from Daimler AG to Toyota Motor Corp.
"This is, without a doubt, positive news," said Juergen Pieper, Frankfurt-based head of automobiles research at Bankhaus Metzler. "You can't completely disregard the fact that there are certain imbalances in China's favor. This could be a signal that if one side is making concessions, it could lead to the Americans easing some of their pressure as well."
Shares of Jaguar Land Rover owner Tata Motors Ltd. and BMW AG posted their biggest intraday gains in more than a month on the news. The Finance Ministry in Beijing said later Tuesday that the step is intended to help reduce prices and aid competition.
The import duty on car parts will be reduced to 6%, China's Finance Ministry said. The shift is significant more for its optics than its potential impact given imported cars made up only about 4.2% of the country's $28.9 million in automobile sales last year.
The latest round of tariff easing is part of a flurry of policy announcements in recent months aimed at demonstrating China's commitment to opening the economy — partly in response to the accusations of protectionism leveled by the Trump administration. Beijing also has pledged to cut ownership limits in the auto sector as well as in banking, and last November, China reduced import tariffs on almost 200 categories of consumer products.
China announced May 18 that it would end its anti-dumping and anti-subsidy investigation into imports of U.S. sorghum, citing the "public interest." That move, coupled with recent steps — including restarting a review of Qualcomm Inc.'s application to acquire NXP Semiconductors NV — signal a conciliatory stance from the Chinese side.