US-China Tariff War Hits GM, Ford, Mercedes SUVs Sales

Photo : AP

China has added a 10% extra tax on big-engine cars brought from the United States. This new tax started on Monday after both countries could not agree on trade rules. The extra tax applies to cars with engines larger than 2.5 liters. This means the total tax on these cars is now 25%.

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This change will mostly affect American car companies like General Motors (GM) and Ford. These companies are already facing problems in China because more people there are buying electric cars made by local companies. GM has already lost over $5 billion in China due to fewer sales and lower profits.

Even though the US does not sell many large-engine cars to China, the value of these sales was about $3.1 billion last year. These cars are usually expensive SUVs and pickup trucks, which are popular among wealthy Chinese buyers.

Some German car companies will also be affected. Mercedes-Benz and BMW build many of their SUVs in the US and send them to China. However, BMW started making one of its popular SUV models in China in 2022, so it will not be hit as hard by the new tax. For Mercedes, this tax could lower its earnings in 2025. The company may try to raise car prices to make up for the loss, but this might be difficult because SUVs in China are already being sold at lower prices.

To attract rich Chinese buyers, GM started a special service in 2022 to bring luxury cars like the Chevrolet Tahoe and GMC Yukon to China. These SUVs have engines bigger than 3 liters, so they will also be affected by the new tax.

Even with these tax changes, the trade fight between the US and China is still not settled. A former US leader, who once threatened to tax goods from Canada and Mexico but later made deals, has said he plans to talk with China’s leaders. Meanwhile, China’s government is asking for more talks to avoid a bigger trade problem.