Monday, March 20, 2017

Trump Planning Auto Trade Fight with China



Senior White House officials are quietly preparing to confront China over what they consider unfair practices in the auto industry. It's a move that could profoundly disrupt relations between the superpowers, reports Jonathan Swan.

According to Swan, expect the issue to pop in President Trump's talks next month with China's Xi Jinping.

  • When U.S. automakers sell in China, they are met with import tariffs of 25%. That's why 96% of the 27.5 million vehicles sold in China last year were built there.
  • When U.S. automakers like GM build in China, they are required by law to form joint ventures with Chinese companies. Those Chinese companies must own 50% or more of the venture.
  • By contrast, the U.S. imposes tariffs of just 2.5% and lets foreign car companies own their entire U.S.-based operations.
  • U.S. companies have swallowed these rules since the '90s because the Chinese market is so lucrative. But Trump and his nationalist-minded advisers — Steve Bannon, Stephen Miller and Peter Navarro — find the status quo unacceptable.
In other words, because China has dumb, standard-of-living lowering trade policies, Trump may implement similar policies in the United States against China. 

Unilateral free trade works. It is the best policy, regardless of what foreign nations do.

-RW 

3 comments:

  1. When I look at China's government it becomes clear they want to capture the manufacturing capital. The physical and the intellectual. The partnerships and domestic ownership and high tariffs work to achieve that. The lure of their large market and low priced labor do as well.

    While Trump's tariffs are not the answer neither is continuing to allow the asymmetric conditions to continue unchallenged because the government of China is not playing the same short game.

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    Replies
    1. Re: Jimmy Joe Meeker,

      --- When I look at China's government it becomes clear they want to capture the manufacturing capital. ---

      That doesn't mean they're doing it correctly.

      --- While Trump's tariffs are not the answer neither is continuing to allow the asymmetric conditions to continue unchallenged ---

      Why the hell not? If you don't want to trade with Chinese manufacturers, go right ahead. More power to you. But leave the rest very well alone for a change.

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  2. Exact, Francisco if you have not tariff plan to cover your problem then leave the rest. Just wait for the Trump's tariffs and see what next. The point which should be consider most in this is the where people find best place to get a car loan, i think.

    ReplyDelete