Chinese Automaker GAC’S Plans To Enter U.S Could Be Hurt By Trade War

Increased tariff barriers will prevent the Chinese automaker Guangzhou Automobile Group Co Ltd.  to set foot onto the US market, the company said on Wednesday.

US tariffs on imported vehicles from China will have significant effect and impact the planned strategy of automaker to enter the U.S. market by 2019, Feng Xingya GAC Group President told reporters in an auto show in Beijing.

The U.S. government has warned of 25 percent tariff on about 1300 Chinese products which would include products such as gasoline and electric powered motor vehicles. At present similar tariffs are now applicable on import of cars from the U.S. into the country.

In a largest auto show among the Asian Countries on Wednesday, Feng said, “If the United States really levies a 25 percent tariff, it would have significant impact on us. We are now doing studies on our price competitiveness and profit potential (after any tariff increase).”

Some of the large Chinese auto makers such as GAC and Volvo cars-owner Geely Automobile Holdings Ltd are eyeing foreign markets even though very little is exported by Chinese automakers to foreign markets such as the United States.

Considering the fact that the brand name Trumpchi had a close resemblance with the name of U.S. President Donald Trump, GAC Motor – a subsidiary of GAC group, had decided to change the name of its brand Trumchi which the company had unveiled at the Detroit Auto show last year.

It has become increasingly difficult and risky for all Chinese firms seeking to do business in the United States because of the specter of tariffs and Feng said: “Chinese companies should exercise more caution when they enter the U.S, market and make strategies (for any risk).”

The trade tensions between the two largest economies of the world had been raging throughout since the beginning of the year. And even though China has already announced the possibility of tit for tat import tariffs on U.S. goods, there is some hope among experts and analysts that China and U.S. would be able to reach an agreement on trade and be able to avert the possibility of a trade war. It has been reported that trade representatives of both countries are soon to meet up in Beijing.

United States and China would likely come to an agreement on trade and officials from both the countries will hold a meeting to negotiate on trade tensions within a few days, Trump said on Tuesday.

Foreign firms in China will now be able to have more local partners than earlier as China had loosened rules for foreign ownership of domestic automakers which were previously capped at 50 percent.

However foreign auto companies might not be interested in changing the present manufacturing e\arrangement in China, according to GAC’s Feng. “If the law now says you can at most marry four wives, you are not really going to do that,” he said.

(Adapted from Reuters.com)

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