Anyone who thought President Donald Trump was just spewing hype when he criticized China for unfair business practices may want to take a look at the auto industry. Because of the hefty taxes that China imposes on imported vehicles, an American-made Jeep Wrangler could cost $30,000 more in China, making it a lucrative spot for manufacturers to establish plants.
Bill Russo, the former chief executive of Chrysler China, told the New York Times that “This acts as a powerful motivation, especially for mass-market brands, to localize their products in China.”
But back in the U.S., advisers to President Trump say America’s deficit in the auto trade may push Chinese relations further south ahead of the meeting between Trump and his Chinese counterpart President Xi Jinping.
Less than 5% of cars in China are imported, but the figure stands at 25% for the U.S. Throughout his campaign trail, Trump has called for fairer business practice on China’s end and to play on an even playing field when it comes to trade. But with major manufactures moving their manufacturing plants to China, they have aided to the country’s growth as the world’s leading auto maker.
It will undoubtedly be a tough task for the president to “bring jobs back” as he promised.
Former Treasury Secretary Lawrence H. Summers discussed the issue with Li Keqiang, China’s premier, at a closed-door meeting on Monday. Speaking on condition of anonymity to the Times, people with knowledge of the meeting said China’s stance was something along the lines of “every country has trade issues.”
But the economic implications span far beyond differences in tax structure. American auto makers have found a large source of cashflow from China, and many simply changed the channel when Trump referenced China.