Auto stocks are surging after Trump says China will 'reduce and remove tariffs' on US cars

REUTERS/Jason Lee

A visitor gets off a new BMW i8 plug-in hybrid sports car during the Auto China 2016 in Beijing, China, April 25, 2016.

• Auto stocks rallied Monday after Trump tweeted on Sunday that China will cut and remove tariffs on cars imported from the US.
• The tweet came just after the US and China reached a tentative truce on the trade war.
• So far, Trump has posted tariffs on $250 billion goods of Chinese goods coming into the US. And China has targeted $110 billion worth of US imports.
• Earlier this year, China also raised duties on US auto imports to 40%, and slashed auto import tariffs for the broader market to 15% from 25%.

Auto stocks are surging Monday after President Donald Trump said on Sunday that China will cut tariffs on cars imported from the US.

"China has agreed to reduce and remove tariffs on cars coming into China from the US," Trump tweeted. "Currently the tariff is 40%."

"While the words 'reduce' and 'remove' mean entirely different things, the market should enjoy some temp. relief," a team of Evercore analysts led by Arndt Ellinghorst wrote. "Positive for BMW and DAI who import their Chinese SUVs from the US (as well as Tesla who exports all cars globally from US)."

Trump's tweet came one day after a dinner with Chinese President Xi Jinping produced a tentative truce on the trade war between the world's two largest economies.

Trump agreed to postpone new tariffs on Chinese imports by three months and Xi said China would purchase "a not yet agreed upon, but very substantial" amount of US goods and label Fentanyl a controlled substance. However, the current 10% tariffs on $200 billion of Chinese imports will jump to 25% if an agreement isn't reached by 90 days, the White House said.

So far, Trump has posted tariffs on $250 billion goods Chinese goods coming into the US. And China, in retaliation, has targeted on $110 billion worth of US imports. In July, China also raised duties on US auto imports to 40%, while slashing auto import tariffs for the broader market to 15% from 25%, adding a huge headwind for the $10.5 billion worth of cars the US ships to China each year.

And Trump's tweet gave a huge relief for the automakers such as BMW and Daimler AG, who manufacture in the US for export to the world's biggest auto market. Here is the scoreboard of American and European automakers as of 9:35 a.m. ET:

• BMW (BMW): +5.38%
• Daimler (DAI): +4.63%
• Ford Motor (F): +3.08%
• General Motors (GM): +2.77%
• Tesla (TSLA): +2.72%
• Volkswagen (VOW): +2.70%

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• Trump says China will 'reduce and remove tariffs' on car imports from the US