Howes: Trump targeting autos in global trade tiff
All Detroit needs to know about President Donald Trump's proposed tariffs on foreign-made autos and auto parts is the six words he uttered to Fox News on Sunday: “The big thing is the cars.”
The guy who wouldn’t be president without voters in the industrial heartland may not care to understand global supply chains. He may not accept the need for regions to have low-cost producers. But he knows one thing: building and selling cars around the world is a source of national pride in Canada and Mexico, Germany and Britain, Japan and China.
And if America's Dealmaker-in-Chief wants to maximize leverage in concurrent trade talks with foreign capitals, he'll aim directly for the hearts of their auto-producing economy. Like it or not, Trump is doing just that — and business is not going quietly about it, either.
From industry trade groups and chambers of commerce to automakers and foreign governments, opposition to Trump's proposed tariffs on imported vehicles — and the very real threat of retaliation — is drawing nearly universal rebukes from the people who actually do the work.
General Motors Co. says the tariffs would produce "a smaller GM" and would result in fewer jobs, not more. A Fiat Chrysler Automobiles NV executive says the automaker is moving to adjust its global manufacturing footprint in response to the proposed tariffs. Germany's BMW AG opposes the tariffs, and South Korea's Hyundai says the import duties would be "devastating" to its business.
The Alliance of Automobile Manufacturers predicts the proposed 25 percent tariffs on imported vehicles would increase prices an average of $5,800 per vehicle, a move that would disproportionately hit less affluent consumers more likely to buy lower-priced vehicles.
Citing the Peterson Institute for International Economics, the alliance says as many as 195,000 American workers could lose their jobs within three years if rising tariffs force automakers to cut production in response to declining demand. And if foreign countries retaliate with their own tariffs, the American job losses could balloon to as much as 624,000.
None of this, and more, appears to move Trump or the trade hawks inside his administration. Even as he used the Fox News interview to telegraph his negotiating posture, Axios on Monday revealed a draft bill prepared by the White House — titled the "United States Fair and Reciprocal Tariff Act" — that would empower the president "to ignore" basic principles of the World Trade Organization.
Getting legislation like that through Congress, even one controlled by Trump's Republicans, is unlikely. It essentially would grant the president unfettered power to arbitrarily punish adversaries by levying tariffs and other penalties outside rules-based global trade organizations like the WTO.
In his Fox News interview, the president labeled the European Union "possibly as bad as China" and accused the Europeans of blocking American-made metal from their huge market: "They send a Mercedes in; we can't send our cars in."
Not exactly. The EU levies a 10 percent tariff on American-made metal, four times the 2.5 percent duty the United States charges on German, British and Italian imports here. Left out of the lament is the inconvenient fact that demand for American-made models in western Europe is weak and growing weaker.
After 90 years operating on the continent and in the United Kingdom, GM sold its European business to Groupe PSA SA of France — and reduced its sale of U.S.-brand vehicles to a high-priced trickle of Corvettes, Camaros and Cadillacs. Only Ford among the Detroit Three maintains a major presence in Europe, where the vast majority of its sales are produced free of any tariffs.
Also omitted from Trump's complaint is the fact that the United States continues to levy 25 percent tariffs on trucks manufactured outside the country and imported for sale here. The so-called "Chicken Tax," a surviving vestige of a 55-year-old dispute with France, for years has protected Detroit's largest cash cows — full-sized pickups — from foreign competition, chiefly from Toyota Motor Corp. and Nissan Motor Co.
The result: Toyota builds its full-size Tundra in Texas, Nissan assembles its Titan in Mississippi and Honda Motor Co. produces its mid-sized Ridgeline pickup in Alabama. All three represent efforts to deepen the American-ness of the trucks and to skirt the truck tariffs benefiting pickups by GM, Ford and FCA's Ram.
Maybe that's what the president and his team mean when they offer some version of, "everything will be OK." That hard-nosed tariffs will force foreign automakers to build new plants in the United States to augment the volume they already produce here, mostly in the red-state South.
"The big thing I'm focused on is trade," Trump told Fox's Maria Bartiromo, downplaying the negative impact of tariffs on jobs and employers in the United States. "There's going to be no tax. You know why? They're going to build their cars in America. They're going to make 'em here."
Except the economic pain — and likely political fallout — of Trump's power play would be felt long before new BMW and Mercedes plants rise from, say, Georgia fields. If either announced plans tomorrow to build new plants here, this year's midterm elections and the 2020 presidential election would have come and gone before either produced Job One.
For now, the president is unmoved. He says: "We have the worst trade deals in the world. We lose money with everybody. We're going to make it reciprocal. We're going to make them fair. Every country is calling every day saying, 'Let's make a deal, let's make a deal.' It'll all work out."
Unless it doesn't, increasing costs, lowering profits and claiming jobs — exactly as the president was warned by the very people he says he wants to help.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.