Editorial: End trade war before it starts
The presidential campaign is over, and hopefully the flirtation with trade protectionism has ended as well. The new Trump administration will not be able to deliver on its promise of a reinvigorated economy if it also sticks to its pledge to curtail trade.
That was the message Ford Motor Co. CEO Mark Fields delivered at the Los Angeles Auto Show this week.
Ford Motor was a favorite whipping boy of Donald Trump on the campaign trail. As a candidate, Trump blistered the automaker for moving car production to Mexico.
Specifically, he targeted Ford for shifting assembly of the Ford Focus and C-Max hybrid models to that country.
But as Fields said then, the reality of labor contracts with the United Auto Workers union and federal emissions and fuel economy rules make profitably producing small cars in this country nearly impossible.
Fields pointed out that the Wayne plant whose production is moving south of the border will soon be transitioned to building the new Ford Ranger and Bronco. Both are expected to be red-hot models that could add more jobs to the facility.
What is particularly worrisome to Fields, and should be to everyone else, is Trump’s campaign pledge to add a 35 percent tariff on cars and trucks built in Mexico and imported to the United States.
That would seem to be in direct violation of the North America Free Trade Agreement (NAFTA) and the rules of the World Trade Organization. And it would also be terrible economic policy.
“A tariff like that would be imposed on the entire auto sector, and that could have a huge impact on the U.S. economy,” Fields said.
It would surely ignite a trade war, with Mexico slapping tariffs on auto parts imported from United States manufacturers.
Automotive is the largest manufacturing export sector in the U.S., amounting to $54 billion in 2014, according to the Department of Commerce.
Mexico is the third largest export market in terms of value for light vehicles assembled in the United States.
In other words, trade is not a one-way street. American workers are benefiting from free trade with Mexico, just as Mexican workers are.
Ford’s hands are not entirely clean on the issue of free trade. The Dearborn-based automaker opposes the Trans-Pacific Partnership, which would bring together the United States and 11 Pacific Rim countries in a trade consortium.
Fields complains the TPP does not do enough to curtail currency manipulation by some Asian countries. In that view he is in sync with the president-elect.
Trump has also suggested a 45 percent tariff on goods imported from China, which is rapidly becoming America’s most important trading partner. That, too, would have disastrous impact on U.S. workers and economic growth. And it would drive up prices for a wide range of consumer goods.
America always loses when it engages in trade wars. Trump and his team should focus on growing the economy through smarter tax and regulatory policies, rather than throwing up barriers to trade.