Auto Stocks Ride Reduced China Import Tax

Carmakers gained momentum Monday after President Donald Trump announced reduced trade barriers in one of the largest global markets.

What Happened

Trump tweeted late Sunday that China would cut its burdensome import tariffs on American vehicles.

“China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%,” Trump said in the tweet after the G20 meeting.

Why It’s Important

U.S. automakers have suffered depressed sales in China since the foreign government instituted retaliatory tariffs in July.

China’s reversed trade policy would bolster margins and incentivize higher sales volumes in a region with a significant consumer base. Monday morning, Tesla Inc TSLA popped 3.5 percent, General Motors Company GM 3.3 percent, Ford Motor Company F 2.4 percent and Fiat Chrysler Automobiles NV FCAU 2.3 percent.

Chinese automakers such as Nio Inc - ADR NIO also traded up on the news, given the galvanizing implications for their domestic auto market. Amid stunted economic growth and the U.S. trade war, sales are expected to contract this year for the first time in decades.

What’s Next

China has not yet announced its formal policy, and Trump did not clarify details of the cut in his tweet. More information is likely forthcoming.

Related Links:

What China's Proposed 50% Cut To Car Purchase Tax Could Mean For Automakers

China Cuts Car Tariffs, But That May Not Advance The 'America First' Theme