China confirms it will suspend 25% tariff on US cars

China confirmed on Friday that it will suspend the additional 25% tariffs on US imported cars as of 1 January in the latest move to reduce trade tensions between the countries.

China’s tariffs on US automobiles will now be cut to 15% from 40% for three months starting January next year, the ministry of finance said, “in order to implement consensus” reached between US and Chinese leaders at the G20 summit in Argentina.

The truce will affect 144 vehicles and auto parts originating from the US and 5% tariffs on an additional 67 auto items.

Apart from diminishing trade tensions with the US, China is hoping that demand for automobiles will be boosted thanks to the good news. Surveys from the China Passenger Car Association (CPCA), reported this week that retail sales of sedans, multi-purpose vehicles and sport utility vehicles plunged 18% to 2.05 million units in November, which makes a full-year decline very likely in the country.

And Anna-Marie Baisden, head of autos research at Fitch Solutions told CNBC on Friday: "Lowering tariffs might not actually make a big difference because the Chinese market is slowing anyway so even domestic brands are suffering," she said via email.