Automakers feel the fallout of China-US trade tensions

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01:55

Global carmakers are gathering at the Beijing International Automotive Exhibition, where 108 new models are set to be unveiled. The event takes place at a time when trade frictions continue to rub China and the US the wrong way.

Chinese carmakers believe the tension could affect their plans to break into the US market. “That will have a great impact on us,” said Feng Xingya, president of the Guangzhou Automobile Group.

“When there is a 21 percent increase in tariffs, if we calculate it carefully, the increase in the cost will be more than 21 percent. Under such a situation, we are now doing studies on our price competitiveness and profit potential after any tariff increase," Feng added.

The Chinese car market saw nearly 29 million units sold last year, which could soon match those of the EU and the US combined. Earlier this month, the Trump administration threatened to add a 25 percent tariff on some Chinese products, including electric vehicles. China hit back with an extra 25 percent tariff on US cars.

Many are concerned about the ripple effects worldwide.

"The automobile industry is global, so anything that happens to production in the US or China, any shifts in production, will affect the rest of the world. So it's not just the US and China involved in this potential change, it's all countries that have an automotive industry,” said James Chao, Asia-Pacific chief at IHS Markit.

But a Chinese official said on Wednesday that the country is working on a "substantial" tariff reduction for imported cars. Plans have also been released to remove restrictions on foreign investment in China's auto industry.

The country will remove shareholding limits for new energy vehicle firms as soon as this year, then for makers of commercial vehicles in 2020, and passenger cars in 2022. And for foreign automakers on edge over the China-US row, that's good news.