Trump threatens GM with ‘big border tax’
President-elect Donald Trump on Tuesday threatened General Motors Co. with a “big border tax” on Chevy Cruze cars built in Mexico and imported for sale in the United States.
The Republican businessman has proposed a 35 percent import tariff on Mexican-made vehicles and often targeted Ford Motor Co. during his hard-fought campaign against Democrat Hillary Clinton. He turned his focus on GM in a Tuesday morning tweet.
“General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border,” he wrote. “Make in U.S.A. or pay big border tax!”
GM builds the compact Cruze sedan at its Lordstown Assembly Plant in northeast Ohio, and builds the Cruze Hatchback in Mexico. The new Cruze hatch for the U.S. market went on sale late last year.
“All Chevrolet Cruze sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio,” GM said in a statement Tuesday. “GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S.”
GM has not disclosed how many Cruze Hatchbacks it expects to sell, though it confirmed Tuesday that it sold about 4,500 in the U.S. last year. GM expects to have sold about 189,000 Cruze sedans and hatchbacks in the U.S. in 2016, which would be down sharply from the 226,602 sold in 2015. Final sales results will be released Wednesday.
GM, for a short time in the fall, sent Cruzes built in Mexico to the U.S. to help supplement demand as the Lordstown plant launched a redesigned Cruze sedan, a GM spokesman confirmed. The carmaker will cut the third shift at the Lordstown plant later this month because demand for the compact sedan has fallen.
Trump’s attack on GM is a departure because he focused his complaints about Mexican-made vehicles exclusively on Ford during the presidential campaign.
Ford announced Tuesday it is canceling plans to build a $1.6 billion plant in San Luis Potosi, Mexico, and will invest $700 million at its Flat Rock Assembly Plant, creating 700 new jobs there. Ford had planned to ship production of the compact Focus from the Michigan Assembly Plant in Wayne to the San Luis Potosi plant, which had begun some initial construction, President and CEO Mark Fields told reporters. But the automaker decided that given the decline in small-car sales and with some policy changes proposed by Trump, it would halt that investment and instead build the Focus at its existing Hermosillo plant in Mexico.
Trump spokesman Sean Spicer said in a Tuesday call with reporters, “He’s generally made it clear, whether it’s Carrier or other companies, that he wants to bring American jobs home. He doesn’t want companies in the United States to be able to leave this country and sell back to the U.S., leaving the American worker behind.”
To impose a tariff on Mexican-made cars and trucks, the president-elect would have to withdraw the United States from the North American Free Trade Agreement, which imposes no tariff on vehicles being imported and exported between the U.S., Canada and Mexico. He has said he wants to try to renegotiate the deal before pulling the plug on it.
Imposing a new tariff or increasing existing ones requires congressional approval.
Jack Nerad, executive market analyst for Kelley Blue Book, said Trump’s proposed tariff is likely to be a hard sell with U.S. lawmakers.
“My sense of the infamous Cruze tweet is that Trump is jawboning to try to persuade automakers to keep as much production as possible in the United States,” he said. “Trump can’t impose a 35 percent tariff — or any tariff — without consent of Congress, and a big tariff would be a hard sell in the Republican-controlled Congress.”
GM announced in 2015 that it would begin Cruze production in Mexico, promising a $350 million investment in a manufacturing plant in Ramos Arizpe. The Detroit automaker announced in late 2014 that it would invest $5 billion in Mexico over six years, dating from 2013 to 2018. But it has been mum on the details of those investments, including how much would be spent at each of its four production facilities and which vehicles are tied to those investments.
UAW President Dennis Williams said in a statement Tuesday: “The UAW has long believed that companies that sell in our country should build their products in our country. We are proud of the quality of work in Lordstown with the Cruze sedan and we welcome Ford’s Flat Rock announcement today.”
Trump told The Detroit News in September that his proposed tariff on Mexican-built vehicles and parts could serve as “retribution” against U.S. automakers that move production south of the border. His comments at the time largely focused on Ford.
“Right now, there’s no consequence. They take their factory, they leave, they fire everybody in Michigan … and after they fire everybody, they build cars in a different country and they just sell them to us and there’s no retribution, there’s no consequence that will stop them from leaving,” Trump told The News.
Michigan Gov. Rick Snyder has expressed concern there could be consequences if Trump is too aggressive with some of the state’s and country’s largest trade partners.
“The negative consequence is at what point does it shift from being some real improvements that do make sense, to switching to a trade war that would be devastating for our country (and) also other places around the world,” Snyder told The News last month in a year-end interview.
GM shares were trading up nearly 0.5 percent to $35 after 3:30 p.m. Tuesday.
Staff Writers Melissa Nann Burke and Keith Laing contributed.