President Joe Biden threw Detroit automakers a lifeline by slapping 100% tariffs on Chinese-made electric vehicles that have yet to reach our shores.
Citing the threat that China will dump millions of low-priced electric vehicles they can’t sell at home on the U.S. market, Biden on May 14 said, “we’re not going to let China flood our market, making it impossible for American automakers … to compete fairly.”
I wrote a column in March, saying the prospect of Chinese cars being sold in the United States gave me a sense of déjà vu.
In the 1970s small, fuel-efficient Japanese cars were arriving in the U.S. as fuel prices soared. Detroit automakers, then known as the Big Three, struggled to compete with their gas-guzzling land yachts.
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Faced with political, economic and xenophobic backlashes, Japanese automakers agreed in 1981 to limit the number of vehicles they exported to the U.S.
The “voluntary” import restrictions, supported by the Reagan administration, were designed to give Detroit automakers time to become competitive with their foreign rivals. But Detroit automakers failed to meet the challenge.
Chrysler, Ford and General Motors controlled about 75% of the domestic auto market in 1980. Today, their share is about 35% as they’ve ceded precious ground to Asian and European automakers.
But the current threat by Chinese automakers makes Japan’s assault on the U.S. market more in the 1980s seem almost trivial.
How it plays out has enormous implications for Michigan’s auto-driven economy. Some 1.1 million jobs are tied to the state’s auto industry, according to MichAuto. About 20% of all cars and trucks built in the U.S. are manufactured here.
Losing all that would cause incalculable damage to Michigan’s well-being.
The Chinese vowed more than a decade ago to dominate the world market for cars and light trucks with their high-quality, low-cost electric vehicles, using hundreds of billions of dollars in government subsidies.
Today, China has the capacity to manufacture half the world’s 80 million vehicles, according to Asian auto industry analyst James Dunne, citing figures from research firm GlobalData. That could grow to 75% of world manufacturing capacity in just six years.
“Call it the coming China car colossus,” Dunne said.
Chinese companies already are exporting vehicles to countries around the world, except to the U.S., where political tensions between the two countries are boiling.
But if there’s one thing uniting Democrats and Republicans, it’s keeping electric Chinese cars out of the U.S. market as long as possible.
Former President Donald Trump, the likely GOP presidential nominee, has called incursions into the U.S. auto market by the Chinese a potential “bloodbath” for Detroit automakers.
Trump has said that as president, he would hit Chinese cars with a 200% tariff and would not allow the Chinese to enter the U.S. tariff-free by building cars in Mexico under the USMCA trade agreement he negotiated while in the White House.
Meanwhile, Republican lawmakers have been investigating Ford’s battery license agreement with Chinese battery maker CATL.
And Democratic Ohio U.S. Sen. Sherrod Brown last month called for an outright ban of Chinese vehicles in the U.S.
While Trump and Biden may seem aligned on China, their approaches to dealing with the prospect of losing the domestic auto industry to Chinese automakers couldn’t be more different.
As president, Trump ignited a trade war with China, broadly assessing tariffs on thousands of Chinese manufactured goods. Many economists say those tariffs have done little to boost U.S. manufacturing.
Biden’s tariffs are designed to give U.S. producers of electric cars, solar panels and other green-energy products breathing room to compete against the Chinese.
His administration also has enacted stringent regulations on auto exhaust emissions that would eventually require automakers to build mostly battery-powered electric vehicles to blunt the negative impacts of climate change.
Trump, who has repeatedly called global warming a hoax, opposes those regulations and has said he would eliminate them as president.
According to the Washington Post, he even offered oil executives a quid pro quo: if they would raise $1 billion for his campaign, Trump said would eliminate Biden’s environmental rules and policies, and stop new ones from being enacted.
The former president also says the Biden emissions rules are hurting the Detroit Three because consumers don’t want to buy the electric vehicles he says automakers are being forced to produce.
Biden is more tethered to reality. Most auto executives and industry experts say the auto industry must and will eliminate the internal combustion engine to cut pollution and save the planet.
That’s already happening in much of the world. One out of every four vehicles sold globally last year was electric.
It’s difficult to imagine that Detroit automakers could survive for long in a global industry focusing on just building big gas-burning pickups and SUVs in their home market.
Biden’s policies have given them a chance to compete with the Chinese in an electric automotive future.
It won’t be easy, given that China had a 10-year head start in developing electric vehicles. But there is no other choice for the Detroit Three to remain viable.
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