Guest Post by Eric Peters
Trump is getting heat for his threat to impose tariffs on “imported” cars in order to help American car companies. But what about all the “American” cars built outside America?
And what about the “import” brands that build their cars here?
GM and Ford and FiatChrysler have plants in Mexico. The American 1500 series trucks they build there are shipped here. They are objectively imported. Should they be tariffized?
Toyota has a yuge operation in California. Nissan builds its trucks in Tennessee. Honda has plants in Ohio. BMW builds SUVS in South Carolina. Are these “imported” cars? Should they receive protection from the “foreign” competition – even if the brand in question happens to have its corporate HQ here?
The fulsome scurvy truth is there’s no such thing as an “American” car – or an “imported” one. Not anymore.
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Not as they used to be.
People outside the business don’t realize how international not just the car companies have become but also the cars – most of which wouldn’t run without common parts from Bosch (injectors) and Denso (electronics) and ZF (transmissions) and a bunch of others, regardless of the brand on the fender.
Cars are built to a global standard nowadays. Like it or not, it is what it is.
The current Ford Mustang, as a for-instance. It was specifically designed not just for America but also for Europe and other export markets. The influence of this works both ways. One way – in the case of the Mustang – is that it remained rear-wheel-drive. American Mustang buyers demand this – would revolt if Ford changed this to the more common front-wheel-drive layout. So, that stayed. But the Mustang also got a standard four cylinder engine – with a turbo – which was done to make the car more agreeable to European/export market buyers who have to deal with (among other things) gas prices twice as high as what we pay.
The point is, the architecture – an industry term – is global. Go visit a major automaker’s web page; read about it for yourself.
Nationalism is an anachronism, at least in terms of how cars are designed and built as well as where they are built.
Did you know that Jaguar (and Land Rover) are owned by an Indian conglomerate? They are British in heritage, but no longer English. Should they be hit with punitive taxes on account of this? How about all the Buicks GM builds in China? Speaking of that . . . who do you suppose owns Volvo these days? Hint: It’s not the Swedes.
The point here is that imposing tariffs based on who’s an “import” and who’s not is going to be yugely problematic. Trump is operating on the basis of a false premise – one that hasn’t existed in fact since at least the 1980s. In those days, one could at least speak accurately of imported and domestic cars. It is much harder to do so today without it just being idiot demagoguery cynically calculated to inflame the boobs who don’t know any better. Who think, for instance, that their all-American truck was actually made in American rather than hecho en Mexico.
The real problem – which Trump could address without resorting to idiot demagoguery – is not “unfair trade” but stupid (and morally unjustifiable) regulations emanating from Washington. For instance, Corporate Average Fuel Efficiency (CAFE) regs which raise the cost of cars in order to make them use less gas. Which in the first place is none of the government’s proper business.
It’s your car. And in the second place, it’s your gas.
You pay for both. Which makes it no more the government’s business than where you choose to eat and how much you choose to eat. People would get their backs up about the latter – if the government began decreeing where they were allowed to eat – and telling them how much they could eat. It’s the same principle.
CAFE has made cars cost literally thousands of dollars more than they otherwise would. Far more than they do as the result of “unfair” trade. This is not conjecture. It’s verifiable fact. CAFE – the pressure to make every car an economy car, in terms of its average fuel consumption – has pushed the car manufacturers (“foreign” and “domestic”) to add direct injection in place of port fuel injection and put transmissions with nine and ten speeds in ordinary family cars. These “save gas” – but cost money.
Our money.
And that makes it our business – not Uncle’s.
Getting Uncle out of the business of dictating mandatory minimum MPGs would be a boon to everyone, import and domestic alike. It might result in more “gas guzzlers” being made. But that doesn’t mean fuel-efficient cars wouldn’t be available – so long as natural market demand exists for them. It just means the government would no longer be in the business of punishing those who have different demands.
Another productive thing Trump could do would be to get the government out of the “safety” business – which is also none of the government’s business. It is important to define our terms here. We are not talking about defective cars or cars that aren’t roadworthy. Just cars that don’t meet the government’s arbitrary criteria regarding how well they withstand crashing into things.
This, again, is properly our business.
Once upon a time, it was. People could choose very efficient – and very light – cars that maybe couldn’t take a broadside as well as a Cadillac Sedan deVille but also didn’t cost as much as a Sedan deVille and used a lot less gas, too.
The government took those choices away. Trump could give them back.
And unlike the idiotic tariff threats he’s making – which would hurt the car business as well as car buyers – getting Uncle out of the MPG and “safety” business would help everyone.
Well, except for the useless eaters in Washington – who make a fat living inserting themselves into things which are none of their got-damned business.
Actually Eric, you are the idiot. Lets take my Chevy Cruz turbodiesel. Yes, engine and transmission from Germany; but a lot of value added by union workers in Ohio who assemble it. Zero to sixty in about 9 seconds which is quick enough. Gets 40mpg suburban and 61mpg highway and meets ALL government safety and emissions standards. You were saying?
There are essentially two sides in the tariff debate, the one that favors America and the American worker and the one that favors other countries and their foreign workers.
So ask yourself, which side are you on?
Anon – be careful what you wish for, as you might just get it. It is impossible to predict what might happen in a trade war.
Tariffs will increase prices, paid for by workers. Tariffs will reduce exports, paid by workers.
There may be a lag between imports dropping off, and capacity becoming available to replace the imports. Bad for workers, that. And the work may be heavily automated, and may create few jobs.
It is unclear at best what would happen. But here is just one scenario that would be really bad:
What if someone, say China, cut off supply of rare earths? That would be really, really bad, as the US is out of that game. That would be really bad indeed.
Anything can happen in a trade war. Including real war. Good for arms makers, not so good for the grunts on the ground though.
This is dangerous territory.
So we have to act from fear and weakness to our competitors instead of facing them with strength and courage?
No wonder we’re losing out to foreigners, they’re stronger and braver than we are. They promote and favor themselves but we’re afraid of doing the same for ourselves.
Well, tariffs are often used when countries cannot compete. The US needs to compete first, and use tariffs to prevent dumping. I have seen no evidence of steel dumping in the US. Lots of other issues out there, tho.
So why are tariffs being used by our competitors to restrict us in their markets and why do we have to just accept it that way without tariff reciprocity to equalize things?
“Anon – be careful what you wish for, as you might just get it. It is impossible to predict what might happen in a trade war.” True, but we know what happens if we stay on our knees. We go broke. I’m not scared.
I’m for anything that beats the fuck out of globalism. Isn’t America the most resource rich nation on earth? Or close to it?
Any single-threaded argument for or against tarriff’s must begin with a basic assumption that all people and all countries are equal. We here at TBP know this to be a fallacy, governments and other local conditions create an exceptionally nuanced and complex environment that no one arguement can ever hope to ensconce.
There has been an ongoing trade war with the US for decades, unfortunately our leadership has been remiss at firing back. (Ironically we have no hesitation in shooting back for other types of wars.) I happen to fully agree with Trump’s idea of reciprocity. At least attempting to get us on an equal playing field with our trade partners is a win-win for the US, not so much for the ‘globalist’ corporations and by extension GovCo.
If a part or subgroup is built in another country, it benefits the citizens of that country. Why not an American engine in that chevy cruz?
Doug – a lot of cross-ownership these days. Lots of brands have same parent corp. And so they want to use the same engine in all the vehicles, all built in one place to minimize cost by maximizing volume. Car manufacture is very much about economies of scale. Companies want one engine shop, not twenty. Make them have twenty, and costs will go up, and prices.
So cheap is your ideal, all else bows to that?
Cheap beats the fuck out of expensive. Business is about profits and competing.
I do not understand some of the commenters here. Some toyotas, nissans, and BMWs are more ‘american’ than a lot of ‘american’ cars nowadays. Eric is right, this isn’t as cut and dry as trump makes it sounds. The people working in a domestic BMW factory are more American than the Mexicans building chevy trucks. That’s the point he is trying to make. Plus, what helps a certain industry will also hurt consumers or other industries.
While I certainly do blame ‘the big three’ for their failures to compete with foreign companies, Eric is also right that a lot of this blame lies on the government. I believe CAFE standards could be repealed. Why hasn’t trump pushed to do that? It would remove government off our backs in at least one way, AND help domestic auto companies.
Tariffs are already employed across the world; additionally, VAT’s are also used as if they were called a tariff.
I agree with Trump – we should all be on a level playing field./
Eric had me going on the globalization of this industry but then just dived into the usual old saw about CAFE and safety mandates. What the fuck does that have to do with tariffs? And I’m sorry but there are real “fair trade” complaints to be made when there is not wage and environmental parity between trade nations. Manufacturing is moving to Mexico because you can pay the guy on the line $5/hr vs. $25/hr and dump all your manufacturing waste in the river. I’m far less concerned about places like Japan or Germany but fully support tariffs on countries that basically use slave labor at the expense of American jobs. That is not fair competition in any sense of the definition. And the solution is really quite simple, tariff everything from those countries – even parts destined for a value added products. Also watch out for the run around of importing something into a place like Canada and then bringing it into the US. Send that shit back home and don’t even allow it in.
So if your Chevy 1500 is heco en Mexico, yes, it’s gets a tariff. I’m sure GM will get wise very quickly to build that one back here in ‘Merica…
Tariffs? Well the US Constitution does allow for the Congress to levy them. My take? Tariffs only benefits two entities. The first is fed gov. A tariff is a tax after all and therefore the proceeds go to fed gov. I am definitely against fed gov sucking more wealth out of the people that live in the USA. It does not matter whether or not that tariffs are mentioned in the US Constitution.
The second is the domestic maker of the good being taxed. Now the DM doesn’t have to spend money to compete with the foreign seller. The DM hopes the duped peons in the US will buy his higher priced, possibly inferior, product out of national pride. Go USA! Go USA! Go USA! All the while, the peon is actually the one being screwed and forced to pay the tax. The foreign maker of the product certainly doesn’t. They pass on the tax to the final buyer of the good.
When goods can’t cross national boundaries, armies will.
Are you dumb enough to think anybody’s really going to invade us? Give that old tired shit a rest
Are you dumb enough to think that a desperate, failing, far strung empire won’t attack someone in its death throes to relieve domestic political and economic pressure?
The original intent was that our government be financed by tariffs and excise taxes.
That income and thousands of other taxes came along later on.
But I still prefer the tariff and excise tax idea over all those other taxes.
You don’t think these new tariffs mean less taxes on you, do you? They don’t. Your taxes stay the same, and WILL go up again in the future, no matter how much fed gov collects in tariffs. Plus, you get to pay more for certain products.
So, according to some, there is no answer other than the world becoming one big happy global corporation and no borders because of economies of scale. This issue, imo, is a zero sum game. No matter the solution you always end up with a problem.
No jobs but low prices…yippee. Jobs but prices too high…yippee.
Wip – why not just beat them? No, that is too hard.
Europe, Canada, etc., are not the problems. The issue is China. These tariffs do zip to address that. Screwing with the folks that by and large play fair is absurd.
We will never beat them with the current unfair trade advantage they enjoy. We will never beat them with the current regulations we suffer under. We will never beat them with the current cost of doing business. Sure, we have enough useless eaters that we could make work for pennies a day. We have homeless people with full time jobs. Is that the country you want to live in? If it is, I believe you have a black hole you will never be able to fill. My bad, you don’t live here. This is the ageless problem that will go up and down in favor of labor vs. capital and vice versa.
As I understand it, free trade is great for capital but not so much for the environment and mature economies.
How can you say we should compete when you have no problem with non-compete agreements? Wtf? Our current patent system is FUBAR as well. Fix that.
But nooo, it’s better to vilify labor. Where the hell would you be without labor?
Where would labor be without employers? I am smart enough to survive without employees. Are employees smart enough to survive without employers? Really? If so, why all the screeching about we need jobs? Get a clue.
Re non-competes, that is a contractual negotiate, freely entered into. If I have trade secrets, I want them protected. Want to work for me, you would need to agree to protect them. That is what non-competes are about. They are not about limiting competition, but about protecting personal property.
You can be immensely stupid.
I’ve always thought the idea of a country levying a 50% tariff on goods imported from the U.S. with no corresponding tariff on THEIR goods sold here is stupid and counter-productive. As far as parts of cars made overseas, we already know the percentages, so just do the math.
At least in a trade war we have hope of winning something tangible, as opposed to these stupid invasions of countries in the Middle-East that didn’t attack us first. And I include Afghanistan in that number because even the FBI never charged OBL with 9/11.