I live in two worlds -- and have for some time.
In both of these worlds trade is all anyone, with the possible exception of Mark Zuckerberg, is thinking and talking about.
In the political world, always divided to some degree by party and ideology and now by labels like “nationalist” and “globalist”, the terms of debate on trade are set around the following question: Free trade or fair?
In the auto world, especially here in the U.S. where our market is mature and probably at its peak demand, future growth for our plants and our workers will come from exports. So, the question you hear in board rooms across the industry is: how do we get more trade not less?
Needless to say, these questions are not mutually exclusive. They come from very different reactions to the expanded competition that trade allows and how policy makers answer them can lead us down some dangerous paths. And when the House Ways and Means Committee holds its hearing on tariffs tomorrow, those two worlds may occupy space in the same meeting room, but they won't necessarily be communicating with each other.
I’ve watched with great interest the back-and-forth between the U.S. and China on tariffs. This is no small issue in the auto world. These huge economies and the world’s two largest auto markets (China’s is already 60 percent larger and growing rapidly) will drive innovation and set the terms for trade and regulatory policy in this industry for many years to come. President Trump and President Xi are trading threats that could lead to a cycle of retaliation with global implications, and I hope that behind all this, is a desire to address the real issues.
China has a 25 percent tariff on autos compared to our 2.5 percent tariff on cars and 25percent tariff on pickup trucks (that a vestige of a 1960’s trade war with Germany). China also has a significant non-tariff barrier in the form of a requirement that non-Chinese companies find a majority Chinese partner. So, it was heartening to hear, in President’s Xi recent speech, a willingness to change in these areas, and President Trump’s conciliatory response.
And yet, at the same time the U.S. works to reduce these and other non-tariff barriers to trade in other countries – a fight America has led for decades – the Trump Administration is considering imposing one of its own – an environmental tax or fee on imported vehicles.
This ill-considered idea creates significant risk in both orbits.
In the auto world, customers will face the prospect of higher prices while company executives brace for the inevitable retaliation, which will lead to fewer exports and less U.S. production.
In the political world, we risk our credibility as leaders of a global effort to end this bad behavior wherever we find it.
Here’s my question: is that free or fair?