https://www.thestreet.com/investing/stocks/trump-bump-from-trade-truce-should-lift-tesla-daimler-14807419
Things are looking up in the trade discussions between the US and China after the leaders of both countries came to an agreement to hold off on adding any more tariffs for 90 days in order to continue discussions. China is now considering lowering tariffs from 40% to 15% on American produced automobiles coming into China. With news of lowering tariffs, the automobile industry has seen increases in the stock market. One big beneficiary of the lowering of these tariffs will be Tesla, who only produces cars in the US.
While the reduction in tariffs is not a for sure thing yet, the fact that China is willing to consider the reduction bodes well for the trade talks between the US and China. It has become obvious during the trade war between the two countries that President Trump has no intention of backing down, so with China taking this first step, I am hopeful that this will lead to discussions that come to a trade deal within these next 90 days or so.
A reduction in tariffs by China will lead to more domestic production of automobiles, especially from the companies that may have shifted most of their production to other countries, like BMW and Daimler, had the tariffs been held where they are. Also with the possibility of a trade deal on the horizon spending will increase in the US, as the threat of more tariffs diminishes.
I agree with Erin in the lowered Tariffs between China and U.S will be good at least in the short term. This will eventually of course level out so trade between the two countries balances out and there is no net gain in value to either country and the tariffs would need to be re-weighted again, in order for one country to get financial gain. Obviously for companies like Tesla, will profit hugely from the reduction in tariffs because the market in China will get lower price on the product and they will expand their client base in order for them to make a greater revenue. The fact that China has even considered to reduce tariffs shows that the Chinese have evaluated the tariff either way and they have found that they could benefit more from American imports.
ReplyDeleteI agree with Erin that this will produce more domestic production within the U.S. which will be a good thing, especially if China will lower the tariff from 40% to 15%. This will allow the U.S. to import more automobiles into China without being burdened by the high tariff. Tesla will profit immensely from this because they produce electric cars and can help China on some of their pollution problems.
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