Howes: Reality complicates Trump trade tiff with China
President Donald Trump’s brewing trade war with China isn’t likely to do any favors for Detroit’s automakers or some of its foreign rivals.
The No. 1 market for America’s No. 1 automaker, General Motors Co., is China, not the good ol’ US of A. It imports its Buick Envision SUV and Cadillac CT6 plug-in hybrid from China. And Ford Motor Co. is pushing hard to move from also-ran to player in a market it hopes will become fertile ground for next-generation Lincoln’s own interpretation of American luxury.
Volvo Cars Ltd., controlled by China’s Zhejiang Geely Holdings Group since its 2010 acquisition from Ford Motor Co., imports Chinese-built Volvos into the United States. And Guangzhou Automobile Group Motor Co. Ltd. is angling to import its Chinese-built GAC GS8 SUV into the U.S. market by the fourth quarter — in theory, anyway.
Could much of that be imperiled by escalating trade tension between the world’s two largest economies? Too soon to know, partly because the latest round of tariffs remain proposed actions designed (by Trump, at least) to force China to a bilateral negotiating table it has largely managed to avoid.
But what the president and his ilk perceive to be the smart politics of fulfilling campaign promises to rally his base in the industrial Midwest may not be smart business. Not for major auto industry movers who depend on China’s vast market and growth curve to fuel their expansions, to bolster their investment cases and to buy their products.
And not for the global automakers’ expensive plans to answer increasing pressure from Chinese regulators with broad portfolios of gas-electric hybrids and battery-powered electric cars, effectively the platforms for self-driving cars. Think it’s U.S. consumers driving those investments? Nope, it’s Chinese bureaucrats.
Officially, Detroit’s top two automakers are counseling caution. What else could they do? There is no percentage in publicly pushing back, however tempting it may be for auto execs who have learned to negotiate the Sino-American relationship as it is, not as Trump may want it to be.
A brutal trade war doesn’t augur well for stock markets and the wealth effect it engenders among consumers and investors. Look no further than Wednesday’s open on the New York Stock Exchange, where the Dow Jones Industrial Average dropped more than 500 points at the open before recovering to close the day up 230.94 points, or a little less than 1 percent.
Less than 15 months into the Trump era, this much should be clear: the guy whose memoir is called “The Art of the Deal” and who fancies himself to be the shrewdest among the world’s shrewd negotiators nonetheless has what gamblers call “a tell.”
His? Stake out a maximum position that elicits strong reactions and work back to a deal from there. Whether what sometimes worked in cozy New York real estate circles actually translates into effective global statecraft remains to be seen: talking the right game is not the same as doing it.
A sign of Trump’s tell emerged Wednesday with a Bloomberg News report saying the president’s trade negotiators had “softened” a key demand for increased North American content in regional car and truck production — a critical sticking point in talks between the United States, Canada and Mexico.
The president may choose not to acknowledge it, but his tough-guy-on-trade routine is a leadership test he is giving himself. From foreign capitals like Beijing, Moscow and Pyongyang to executive suites in New York, Detroit, Tokyo and Silicon Valley, how he bargains and whether he delivers these trade deals will become a standard other powerful people will use to take his measure.
Ranking auto industry executives already have drawn some preliminary conclusions they prefer to share privately. Among them: Trump will propose stark policy changes only to shrink from them as time and lobbying soften his view; Trump and the business-minded among his policymakers are more amenable to facts, those executives say, than more ideologically driven administrations.
That predisposition will matter as much in proposed revisions of federal fuel-economy standards, also released this week, as they will in managing a trade battle with Asia’s pre-eminent economic power. On balance, the Detroit auto industry has more of a friend in the current administration than an enemy — though the president has his own peculiar way of showing it.
The politics of re-election carry particularly heavy weight, too. It’s no secret that Trump’s path to the White House ran through the industrial Midwest generally and Michigan in particular. That’s why China’s swift answer to Trump’s latest tariff threat is focused so tightly on autos, agriculture and chemicals, key cogs in the Michigan economy.
They aim to inflict maximum pain on a region of the country Trump needs for near-term political support, as well as a bulwark in the so-called “red wall” he hopes to reconstitute in his 2020 re-election bid. The Chinese are not stupid.
Neither are American consumers. If Trump’s trade war with China continues to escalate, and if the reverberations start hitting their wallets and 401(k) statements, they’ll say so. The last thing Trump wants a Democratic challenger asking Michigan voters is, “Who cost you your job?”
Daniel.Howes@detroitnews.com
(313) 222-2106
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.