China's decision to impose punitive duties on some vehicles imported into the country from the United States will hit BMW and Daimler as well as U.S. automakers.
The U.S. units of BMW and Daimler's Mercedes-Benz will face duties of 2 percent and 2.7 percent, respectively, China's commerce ministry said in a statement on its Web site on Wednesday.
General Motors Co. will face duties ranging from 8.9 percent to 12.9 percent, according to the statement. Chrysler Group's duties will range from 6.2 percent to 8.8 percent.
The taxes affect vehicles with engines that are above 2.5 liters.
Honda's U.S. operations and other automakers the ministry didn't specify will also be subject to the tax. China currently imposes tariffs of 25 percent on imported cars.
BMW and Mercedes both export sport-utility vehicles from the U.S. BMW is expanding its factory in South Carolina to produce as many as 300,000 X5, X6, and X3 SUVs next year from 270,000 in 2011.
Daimler plans to invest $2.4 billion between 2010 and 2014 at its plant in Alabama to add equipment for the assembly of the C-class sedan. The company currently makes the M class and GL SUVs as well as the R-class wagon at the site. The plant produced 125,400 vehicles in 2010.
The ministry's statement said U.S. cars and sport utility vehicles benefited from subsidies and had been dumped into the China market, causing "substantial damage" to China's domestic industry.
BMW doesn't expect the new import duties to have a significant impact on its sales in China, spokesman Mathias Schmidt said, adding that the failure to resolve the trade dispute was "regrettable."
Mercedes is reviewing the potential impact from the duties, spokeswoman Bettina Singhartinger said.
Namrita Chow, a senior analyst at IHS Automotive in Shanghai, said : "This is hardly going to flummox the buyer of a high-end car. They're really not going to be bothered by a few percent here and there."
China's vehicle sales have slowed this year from 2010's record 32 percent expansion pace as inflation, higher interest rates and the end of a two-year stimulus plan deter purchases.
Chinese deliveries may expand at a slower pace than U.S. light vehicle sales for the first time since at least 1998, according to the Chinese trade group.
Mercedes is discounting locally produced vehicles in China by 6 percent to 10 percent, while BMW is offering some "small discounts" on inventory that is more than six months old, Jose Asumendi, a Royal Bank of Scotland Group analyst, said in a note to investors on Wednesday, citing dealer visits in the country.
Volkswagen AG is discounting imported vehicles by 5 percent, and offering limited or no discounts for locally produced cars, Asumendi said.
U.S.-China trade tensions
The announcement comes after the World Trade Organization in September rejected China's appeal of a ruling that backed U.S. duties on tire imports.
U.S.-China trade tensions have been mounting in recent months, particularly in the solar industry, where tit-for-tat trade probes have underscored leaders' warnings of a rising tide of protectionism amid gloomy global economic forecasts.
Ten years after China joined the World Trade Organization, experts say it is likely to become more deeply enmeshed in trade disputes.
More problems for Beijing at the WTO will be partly due to its ever-expanding trade footprint, but also because many of its trading partners have growing concerns over what they see as state support for strategic industries.
The United States has filed trade 12 cases against China since it joined the WTO, five since U.S. President Barack Obama took office.
China's Commerce Minister Chen Deming said in late November the country is likely to fight back if other countries resort to trade protectionism.
Sources: Bloomberg and Reuters