A Chevrolet Equinox SUV is seen on the production line at SAIC-GM Wuhan Manufacturing Plant on April 7, 2017 in Wuhan, China.

Shares of Ford and General Motors both rose on the news, gaining as much as 1.1 percent and 1.8 percent, respectively, before closing off those highs. Tesla initially rose 1.2 percent but closed down 3.3 percent.

The Chinese Finance Ministry said tariffs on certain vehicles will come down to 15 percent from as much as 25 percent while levies on some parts will be brought down to 6 percent effective July 1.

Auto stocks rose Tuesday after China said it will slash tariffs on some car parts and vehicles as part of ongoing trade negotiations with the United States.

China is a big market for these automakers. GM sold more than 4 million cars in China last year for the first time, while Tesla doubled its revenue from China to $2 billion in 2017. Ford, meanwhile, sold 1.19 million vehicles in China in 2017, a 6 percent slowdown from the previous year.

"We welcome China's announcement to reduce auto import tariffs," a Ford spokesperson told CNBC.

China's announcement comes after Treasury Secretary Steven Mnuchin told CNBC on Monday the U.S. has made "very meaningful progress" with China on trade matters, noting: "Now it's up to both of us to make sure that we can implement it."

Mnuchin's comments followed remarks he made over the weekend when he said the prospect of a trade war between the U.S. and China was "on hold" as the two countries worked to smooth out trade relations.

The remarks pushed U.S. equities higher on Monday, with the Dow Jones industrial average rallying nearly 300 points to close above 25,000 for the first time since March.