The Obama Administration has filed a complaint with the World Trade Commission over China’s hefty new duties on American-made cars.
The import tariffs cover about 80% of the vehicles shipped from the U.S. to China – including products assembled at foreign-owned plants such as the Mercedes-Benz factory in Alabama – and could cost manufacturers as much as $3.3 billion. The tariffs are also expected to force makers like General Motors to shift more production from the U.S. to China.
“China must play by the global rules of the trading system,” said a White House statement.
It’s the latest salvo in an increasingly nasty trade war that saw the U.S. impose major new tariffs on Chinese-made tires that were allegedly being dumped – or sold at a price lower than the cost of production. The WTC has upheld the tire duties, much to the anger of Chinese officials.
The Chinese auto import tariffs vary widely by manufacturers and are stiffest for products built by Detroit’s Big Three. The Cadillac CTS and Buick Enclave, for example, are subject to 22% duties, the Jeep Wrangler and Grand Cherokee models 15%. The American-made Acura TL sedan, on the other hand, faces only a 4.1% mark-up.
The White House contends Chrysler and GM were intentionally hit hardest because of the 2009 federal bailout of those two makers – and the fact that the U.S. Treasury still holds a large stake in GM.
Under the complex series of trade rules handled by the World Trade Commission, nations may take steps to correct unfair or illegal trading practices. But the remedies are strictly defined – and they can be challenged.
“American auto workers and manufacturers deserve a level playing field and we are taking every step necessary to stand up for them,” said U.S. Trade Representative Ron Kirk. “This is the third time that the Obama administration has challenged China’s misuse of trade remedies.”
In recent years, most auto manufacturers have rapidly expanded the number of vehicles they produce in China, but there are still a number of products being exported from the U.S. into what is now the world’s largest automotive market. The new tariffs cover about 92,000 large and luxury cars and SUVs with an estimated value of about $3.3 billion annually.
Since the tariffs were announced General Motors has decided to start building its new Cadillac XTS flagship in China, though it is not clear whether the import duties impacted the maker’s decision.