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China targets American vehicles, fuel with latest tariffs

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China targets American vehicles, fuel with latest tariffs

Billions of dollars' worth of passenger vehicles, metals and fuel are at risk from China's latest batch of planned tariffs targeting U.S. exports, according to an analysis by Panjiva Research, a division of S&P Global Inc.

China's Ministry of Commerce announced Aug. 8 that it would implement a retaliatory 25% tariff on $16 billion of imports from the U.S., a move that further escalates tensions in the tit-for-tat trade war between the two nations.

Of the 333 U.S. products targeted, the largest category by far in terms of dollar volume is 1.5-liter-engine passenger vehicles, which totaled $5.63 billion in exports to China for the year ended June 30, according to Panjiva.

Other top products impacted by the tariffs include copper waste and scrap exports to China totaling $1.75 billion for the same period, as well as liquefied propane totaling $1.58 billion, 3.0-liter-engine motor vehicles with a total export value of $1.57 billion, and aluminum waste and scrap totaling $1.12 billion, according to Panjiva.

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Car companies most exposed to China's latest tariff measure include Bayerische Motoren Werke AG and Daimler AG because they have sole-sourcing production, or produce one vehicle line solely in the U.S., Rebecca Lindland, executive analyst for Kelley Blue Book, said in an interview.

Because the tariffs would cause a price increase of about 25% on exports to China, demand will go down, which could lead to layoffs at the U.S. production facilities, as well as potential hits to the companies' balance sheets, which could eventually trickle down to profitability and stock value, Lindland said.

"The automotive industry isn't flexible in terms of production locations," Lindland said. "Those are decisions made with a great amount of thought, over a great amount of time, with a great amount of investment. To suddenly expect them to turn on a dime isn't realistic."

Lindland said Tesla Inc. and Fiat Chrysler Automobiles NV could also be impacted, specifically in regard to the latter's Jeep vehicle lines.

General Motors Co., however, has a substantial Chinese production presence and would take less of a hit from the measure, Lindland said.

BMW, Fiat Chrysler and Tesla did not immediately return requests for comment.

Other products included on the $16 billion list are bicycles, golf carts, snowmobiles, tractors, vaseline, charcoal, motorcycles and trailers.

Gary Hufbauer, nonresident senior fellow for the Peterson Institute for International Economics, said the reason the autos were targeted is clear.

"I think the reason vehicles were targeted is that for President Trump, autos are an iconic industry to him," Hufbauer said. "He values that industry above many other industries. I think they wanted to show him that they could deliver pain to an industry that he is heavily invested in."

As far as American petroleum being a target, Hufbauer said Beijing is able to get comparable fuels at a similar price elsewhere. It is also an industry Trump is quite proud of, Hufbauer added.

China's tariff measure, slated to go into effect Aug. 23, is reciprocal retaliation against the Trump administration's planned 25% tariff on $16 billion worth of Chinese goods slated to take effect the same day.

The U.S. Trade Representative's Office said Aug. 7 that it would move ahead with that measure, which is the second tranche of a two-part tariff implementation totaling $50 billion of Chinese goods.

The USTR's Office did not return a request for comment Aug. 8 regarding China's latest proposed retaliatory tariffs.

The U.S. is also weighing a separate batch of 25% tariffs on $200 billion of Chinese goods. Public hearings are scheduled for Aug. 20-23 on that tranche, which targets a number of consumer goods including furniture, handbags, appliances and mattresses. China has already said it will hit back with its own tariffs ranging from 5% to 25% on $60 billion of U.S. exports should that $200 billion batch be implemented.

Both countries have already imposed separate 25% tariffs on $34 billion worth of each other's exports.

Despite the billions of dollars of pending tariffs between the two nations, Ryan Sweet, director of real-time economics for Moody's Analytics, declined to call the ongoing dispute between the two nations a trade war.

In an interview, Sweet said the already-imposed tariffs have taken just one or two tenths of a percentage point off of U.S. GDP growth, but still called them an "unnecessary ding" to the economy. Should the U.S. put tariffs on all $505.5 billion of annual imports from China, then it would be an all-out trade war, Sweet said.

"If we go all-in and put tariffs on all goods, then yes, the economic costs increase noticeably," Sweet said. "Time will tell if the Trump administration goes down that road. But the path to de-escalation looks a little harder to go down than we anticipated a few months ago."