US auto makers at risk if Trump targets China’s industry
Country has tools to respond protectionist measures: experts
US carmakers such as General Motors and Ford Motors would stand to lose the most if tensions rise in automotive trade between China and the US, Chinese experts warned on Wednesday.
The US, under President Donald Trump, is reportedly considering challenging China over what it deems are unfair policies toward US automakers, which experts in China said, if pursued, would almost certainly draw firm responses from China against US interests.
“White House officials are quietly preparing to confront China over trade in the auto industry… a move that could profoundly disrupt relations between the superpowers,” US online news site axios. com reported on Sunday.
A rising deficit in automotive trade has become a pressing issue at the White House, according to the New York Times on Monday, which hinted that tough talks could be expected during a meeting between Chinese president Xi Jinping and Trump next month.
Details of how the US would challenge China remain sketchy, but experts noted that China would have an upper hand in a potential trade conflict in the auto industry.
“This is a very strange idea. There is not much to target on the Chinese auto industry,” Zeng Zhiling, an analyst at Shanghai- based consultancy LMC Automotives, told the Global Times on Sunday.
Zeng pointed out that Chinese car exports to the US are so small that they can be ignored and that the US has been targeting Chinese auto part exports for years who already face high tariffs.
“Even if the US takes some protectionist measures against China in the auto industry, I’m afraid it will have little impact on the Chinese market,” Shi Jianhua, a deputy secretary- general at the China Association of Automobile Manufacturers said at a briefing in January, pointing to the limited Chinese exports of cars and parts to the US.
Still, any protectionist and unfair trade practices from the US against China would likely draw firm responses from China, and it is the US and its car companies that would lose more, not the other way around, according to Wu Shuocheng, a Shanghai- based independent industry expert.
“US companies like General Motors, Ford and Fiat- Chrysler all have huge operations in the Chinese market,” Wu told the Global Times on Wednesday. “If tensions escalate, they have much more to lose.”
US car companies have been increasingly dependent on the Chinese market in recent years. In 2016, General Motors sold more than 3.87 million cars in China, a 7.1 percent increase from the previous year, accounting for more than one- third of its global sales. Ford Motors posted record sales of 1.27 million in the domestic market, up 14 percent year- on- year, nearly half the number sold in the US.
Though General Motors and Ford Motors produce most of their cars sold in China, there are still some premium models that are made in the US and imported to China, according to exports.
In responding to US confrontations, China could impose higher tariffs on car imports from the US, which will not only cover US cars but some German cars such as Mercedes- Benz and BMW that are built in the US and shipped to China, according to Wu.
Zeng added that China could also tighten restrictions on US car firms in the Chinese market. “I think the [ Trump administration] lacks the understanding of the Chinese market,” he said.
Open market
The Trump administration is reportedly unhappy about the market limits in China, according to the axios. com report, citing the tariffs of 25 percent on car imports and ownership restrictions in China that require foreign companies to form a joint venture with a Chinese partner.
But Chinese officials and experts said that the Chinese market, filled with brands from the US, Europe and Japan, is open and fair.
In a meeting with heads of foreign companies on Monday, Premier Li Keqiang pointed out that more than 90 percent of the premium cars in China are foreign brands and asked “Are we not open enough?” according to a post on the central government’s website.
Li said that China will continue to create a better environment for foreign firms in China based on the principle of fair competition. The premier was responding to a question about market access posted by Lawrence Summers, a former US Treasury Secretary, who brought up the auto industry.
Zeng, the analyst at LMC, said “you just have to look at all the car brands from all around the world on the streets” to see if the Chinese market is open enough.