Trade disputes between the US and China have been ratcheted up a notch with news that China is to levy a tax on a range of cars built in the United States. The news follows a decision taken by the US to significantly increase taxes on Chinese made tyres.
Rather than admitting the move was straight-forward retaliation, the Chinese have stated that the US made cars are saturating Chinese markets, which is harming the domestic vehicle manufacturing industry. The decision is a very notable one, since China is now the world's largest car market.
Models of cars that have been built in the USA by Chrysler, General Motors, Mercedes Benz and BMW will be affected by the new taxes, which will range from 2% to
21.5% on various cars and SUVs that have engines larger than 2 litres. The taxes will be in effect for 2 years.
The decision to levy the taxes follows a 2 year campaign by the Chinese in which they fought US taxes on Chinese made tyres. The World Trade Organisation ruled in favour of the US - a move that makes it much harder for Chinese tyre makers to sell their wares in the US market.
But US car makers will perhaps be worse affected, since the Chinese market is worth so much - and is growing all the time. Having suffered the equivalent of a car breakdown following the crash of 2008, US carmakers were starting to get back on track; news of China's decision is likely to be a bitter blow to the brands affected.
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