July 3, 2022
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China is about to temporarily drop a 25 percent tariff on imported US cars as the two countries try to work toward a resolution of the recent trade war, Chinese government officials announced on Friday. The government there had tacked that 25 percent tariff onto an existing 15 percent import tax earlier this year as part of the escalation between the two sides.

The changes will go into effect on January 1st. As a result, Tesla quickly moved to lower prices on the Model S and Model X by about $15,200 and $9,400, respectively. The company’s cheapest car, the Model 3, is available for pre-order in China, but deliveries will start after spring 2019.

This announcement was made just after President Trump announced, without details, on Twitter that China would reduce and remove the tariff on cars. His proclamation followed a post G20 summit dinner with China’s president Xi Jinping, and it set off a scramble the following day among cabinet members and advisers who offered competing interpretations of what changes, if any, could go into effect.

Auto sales in China are down this year across the board. The country is staring down the first sales drop in almost 30 years, in part because of the trade war, but also because China’s economy is finally cooling off after decades of intense growth.

While the added tariff had an obvious impact on Tesla, it did the most damage to BMW and Daimler, the parent company of Mercedes-Benz. The two German automakers export more US-made cars to China than any of their competition. 

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