Automakers to Trump: Thanks But No Thanks

Written by SK Ashby

While it's unlikely to ever happen because it would require congressional approval, Trump announced a proposal for providing tax breaks for manufacturers who move operations back to the United States.

Even if such a program did exist, however, American automakers say it wouldn't help them.

Most of the vehicles that Americans drive were manufactured in North America and American companies operating in China do so in joint ventures to serve the domestic Chinese market.

Asked about the possibility of shifting production back, GM said in an e-mailed statement that won’t happen.

"Our operations (in China) are joint ventures with local companies that overwhelmingly produce vehicles for the domestic Chinese market," the company said in a statement. "We do repatriate the equity income we earn in China back to the United States, where it is subject to tax."

Ironically, Trump's trade war and protectionist policies have shifted more production to China, not less.

Exports of American-made vehicles to China have plummeted compared to the record high number of exports reached under the Obama administration.

Tit-for-tat tariffs on American-made vehicles have made them increasingly non-competitive, forcing manufacturers like GM, Ford, BMW and Mercedes-Benz to turn to local Chinese sourcing. That reduces their exports to what is now the world’s largest automotive market, according to Joe Langley, the associate director of automotive research for IHS Markit. [...]

The U.S. exported 192,210 vehicles to China in 2019, according to U.S. government data, up from the 163,618 shipped there the year before – but down from 262,483 in 2017 when the trade war was just getting underway. The record was set under President Barack Obama in 2014 when American plants provided 314,580 vehicles for the Chinese market.

If exports had fallen by this much in 2019 before the coronavirus pandemic existed, I think we can expect 2020 numbers to be even lower.

What is particularly worrisome, said IHS Markit analyst Langley, is that the pandemic will result in about a 20 percent reduction in global vehicle sales this year and could take years before the industry fully recovers.

In the meantime, he anticipated a worldwide “realignment” of manufacturing capacity that could hit the U.S. industry hard.

There's not shortage of reasons why reelecting Trump would be bad and this is not necessarily even near the top of the list (my personal top two are civil rights and foreign policy), but we know he won't help matters.

Whatever is coming because of global economic factors will be made worse by Trump's presence. Everything he touches turns to shit.