Donald Trump this week celebrated a small victory in a preamble battle to the Trade War he wants to start and insists will be easy to win. China announced that they will cut import tariffs for cars from 25% to just 15% starting on January 1. Car parts will be cut from 10% to 6%, which will help lower the cost to build new cars in the country as well. In exchange, the United States has lifted a ban on products from Chinese telecom company ZTE Corporation, which had apparently crippled the company. Set to benefit most from the relaxed tariffs are Volkswagen and luxury car makers like BMW and Mercedes-Benz, who don’t produce cars in China. Tesla also benefits, as do some premium Japanese brands, which will now be able to compete cost-wise on a more level playing field with vehicles produced in China.
This doesn’t particularly help Ford or GM, who have already established extensive production in China specifically to avoid high tariffs, and with the 15% tariff still in place, there isn’t much likelihood brands will magically decide to start producing cars in the States again and ship them over. There’s also some rich irony that the Germans seem to benefit most from the actions of the U.S. President.
Photo by Dilworth Police Department
And while China cuts their import tariffs, Trump heard only the phrase “import tariff” and decided “yeah, that’s a great idea, let’s look into that” and assigned the U.S. Secretary of Commerce some homework. Specifically, Trump wants him to initiate a Section 232 investigation into the import of automobiles, trucks and auto parts to determine their effects on America’s national security. And right now you’re thinking “oh, this is supremely stupid,” but remember, it has happened twice that Ford Fusions from a plant in Mexico were caught in the U.S. loaded down with a bunch of weed that some drug mules north of the border failed to offload, so it’s entirely possible that cars are the single greatest source of drug trafficking in the United States. Or maybe it could be that pot should be legalized and regulated and we wouldn’t have people smuggling it in and that two examples of some incompetent drug cartel don’t exactly signify a trend. In any case, the Commerce Secretary will decide.
But Trump’s call for the investigation itself has been met with widespread condemnation from, well, kind of everyone. It’s being regarded as a waste of time and resources that could end up not only harming our relationship with other countries, but harming American consumers through generating higher prices for goods, much like the tariffs on steel and aluminum have done. Moreover, most consider it a stretch to think that an import tariff has anything to do with national security, with Canadian Prime Minister Justin Trudeau going so far as to say it rests on “even flimsier logical grounds.” Automotive News has a great roundup of all the quotes lambasting the move but the best and most concise probably comes from John Bozzella, CEO of the Association of Global Automakers, who said “The U.S. auto industry is thriving and growing. To our knowledge, no one is asking for this protection. This path leads inevitably to fewer choices and higher prices for cars and trucks in America.” So who’s going to win this Trade War again?
Authored by
Devlin Riggs