auto industry

Trump's Car Policy Benefits China

  • Why it matters

    Why it matters

    If U.S. auto policy only focuses on short term deals and jobs, the failure to focus on the long term will cost the country its lead in technology.

  • Facts


    • President-elect Donald Trump vowed to bring jobs back to the United States through protectionist measures.
    • Mr. Trump is threatening to levy higher taxes on carmakers producing vehicles in Mexico for the U.S. market.
    • China is far ahead of Europe and the U.S. in terms of e-car sales and is committed to supporting the vehicles with a set of policies including subsidies through 2020.
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A man charges the batteries of BAIC Motors electric cars, which will be serve as official vehicles for the APEC Summit, at a new charging station at the Beijing Capital International Airport in Beijing
Trump's auto industry policy could cost the U.S. its technology leadership in the long term. Source: Reuters

No one believed Donald Trump would win the election. His tweets kept raising eyebrows. But despite his railing against Wall Street, Goldman Sachs now has a firm spot in his Cabinet. Oil executive Mr. Tillerson, reportedly close to Putin, is his choice for Secretary of State. Despite criticism from the Republicans, Mr. Trump plans to lift the sanctions against Russia. All this creates a picture of an aggressive, unpredictable person.

But Mr. Trump is a man for quick deals that succeed overnight, like in real estate or investment banking and it all makes sense by this kind of logic. He won the election based on his promise to bring jobs back to white Americans in the northwestern Rust Belt.

New technologies take a long time to bear fruit so obviously it’s better to revitalize old industries, bring out the old eight-cylinders in Detroit and get the production lines moving again. His friendship with Russia will keep oil prices low and as he sees it, climate change is only a fairy tale anyway. His plan to “Make America great again” means flooding Detroit with cheap gas without any annoying climate regulations.

Mr. Trump is predictable by the logic of investment banking or that of the real estate sector.

The investment bankers in Washington will pave his way, after all, they’re trained to get quick successes, their work is all about deals that make money overnight. They don’t look beyond the next day’s deals – anything longer term is somebody else’s problem. What counts is ever-faster deals.

Mr. Trump plans to boost demand with an economic stimulus program. With cheap gas and more money in their pockets, Americans will buy again and America’s car market will hit new heights. Wall Street is already responding but Mr. Trump wants more so he sends out tweets like “Make in USA or pay big border tax!” If there’s a 30 percent border tax, Audi would have to forget its new plant in Mexico. Cars from Mexico lose their competitiveness overnight.

The logic goes, Americans buy 3 million more cars than the country produces. If only half that number are made in the United States by ramping up production, that’s 100,000 more jobs. With an economic stimulus program, plus border tax, the jobs will multiply in the Rust Belt. Mr. Trump is predictable by the logic of investment banking or that of the real estate sector – by that logic, protectionism a good deal.

That all works in the short term. Mr. Trump, like Keynes, believes, “in the long run, we’re all dead.” But in the long run, the United States will gamble away its lead in technology. And it’s pretty predictable who will benefit from that: China, the world’s largest car market, which is firmly committed to a major expansion in e-mobility.


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