China will cut import tariffs on cars and auto parts from July 1, the Ministry of Finance announced. Import tariffs will be cut to 15% from 20% to 25% for most vehicles. Import tariffs on auto parts would be cut to 6% from 8% to 25%. “Lowering auto import tariffs is a major step for China to further expand its reform and opening-up,” the Ministry said. After the reduction, the average tariff rates for vehicles and auto parts will be 13.8% and 6%, respectively. The latest move will boost foreign car manufacturers, especially those companies which import premium and high-end vehicles to China.

Luxury carmaker BMW said the company “highly welcomes the government’s announcement.” Volkswagen’s luxury subsidiary Porsche told Shanghai Daily: “We believe it shows the world a more open Chinese market. More importantly, Chinese customers will have the chance to enjoy an more optimized price and pursue more personalized options when buying a car,” the German carmaker said. Porsche said it has already started the evaluation process for the necessary price adjustment based on the new tariff policy. Japan’s Toyota said it would adjust retail prices for imported cars that benefited from the lower tariffs.

This year, China will also ease restrictions on shares that foreign automakers can own in joint ventures of new-energy and special-purpose vehicle firms. In 2020, the country will relax foreign ownership limits in joint ventures that produce commercial vehicles. In 2022, China will scrap rules that limit foreign automakers to no more than two joint ventures with Chinese partners.

Last year, China imported 1.22 million vehicles, some 4.2% of total sales. Most of the imports were from the United States, Germany, Japan and the United Kingdom.

China’s move to reduce tariffs on imported cars to 15% makes little difference to U.S carmakers. Traditional Detroit brands such as Chevrolet collectively exported fewer than 100,000 vehicles to China last year. The 25% tariff that carmakers faced for years led them to open plants with partners in the country to avoid import taxes altogether. “I don’t think it changes much,” Kevin Tynan, Car Analyst for Bloomberg Intelligence, said. “The companies are already established in terms of manufacturing and dealer networks. And 15% is still a significant tariff.” Ford did the most exporting among U.S. carmakers by shipping almost 74,000 cars to China last year, mostly for its premium brand Lincoln. But Toyota Motor and BMW both imported almost three times more, while General Motors imported fewer than 2,600 vehicles last year. The impact of the tariff reductions will therefore be different for each carmaker. Tesla will benefit because China’s government provides incentives to new-energy vehicle buyers, and the electric-car maker relied entirely on imports for the more than USD2 billion in sales it generated in the country last year.

The U.S. on the other hand is contemplating imposing new tariffs on car imports after the Trump administration has initiated a national security investigation into car and truck imports under Section 232 of the Trade Expansion Act of 1962. The inquiry will determine whether vehicle and parts imports were threatening the domestic industry’s health and ability to research and develop new, advanced technologies. “There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said in a statement, promising a “thorough, fair and transparent investigation”. Roughly one-third of all U.S. vehicle imports last year were from Asia. Roughly 12 million cars and trucks were produced in the United States last year, while the country imported 8.3 million vehicles worth USD192 billion. The United States exported nearly 2 million vehicles worldwide worth USD57 billion.