Car wars will escalate if Ross issues ‘crazy finding’

The toughest assignment in US government today will be validating Trump’s suspicions about foreign car companies.

US Commerce Secretary Wilbur Ross. Picture: AFP

Truly the most challenging assignment in US government today will be validating Donald Trump’s suspicion that foreign car companies threaten US national security.

We don’t envy Commerce Secretary Wilbur Ross, whose department is tasked with making the case.

Let’s see, 56 per cent of US cars are already built in domestic plants, and 78 per cent if you count Canada’s and Mexico’s highly US-dependent car industries.

Mr Trump likes factories. Foreigners are huge contributors to the US manufacturing base, with 17 car assembly plants here. Mr Trump likes exports. Germany is the single biggest exporter of cars made in the US, shipping abroad 400,000 Mercedes and BMW cars a year.

The US car industry has been quietly aghast at Mr Trump’s threat of a new trade war by imposing a 25 per cent tax on European cars. Carmakers have been pushing back in a low-key, white-papery way calculated not to invite the kind of tweets that Harley-Davidson elicited.

Then there’s this: what many of us would regard as a Trump victory, getting Europe to drop its 10 per cent car tariff, would not be regarded as such by the US carmakers if they had to give up America’s 25 per cent tax on imported pick-ups.

The German carmakers have taken it on themselves to make lemonade out of this episode by promoting a zero-for-zero solution — which would be a big win for US consumers. But wasn’t the Trump administration last seen celebrating the pick-up tax’s extension in its South Korean trade deal? The so-called chicken tax, dating from a 1960s trade war, is far more central to Detroit’s business model than Europe’s tariff is to Daimler’s or BMW’s.

Besides, zero-for-zero is a free-trader’s dream. It’s hard to reconcile with Mr Trump’s belief that high tariffs are a good thing — he thinks they encourage foreigners to bring their factories here (which can be true in certain cases, though it doesn’t affect the overall trade balance since the US must still import enough goods and services to offset a gap between domestic savings and investment).

Mr Trump considers it a coup that Reagan’s import restrictions in the 1980s prompted a flood of Japanese investment to set up car plants in the US. But that victory is already in the bag. Of the hundreds of car models in the US market, four of the top seven in terms of US content are made by Honda. Only one of America’s beloved pick-ups — Ford’s F-150 — makes the top 10. Mr Trump is messing with a complex global car manufacturing order that’s working pretty well for Americans right now.

Which brings up a difficult question: Does Mr Trump know what he’s doing? Did Barack Obama or George W. Bush? Hillary Clinton would have known her way around the presidency — she saw it up close during Bill Clinton’s eight years, plus had a prime seat under Obama. Yet it’s hardly likely that under a Hillary presidency we’d be experiencing anything as good as today’s jobs and investment boom that arose because Mr Trump is not Mr Obama.

We’ve come to the Atlantic City casino moment of Mr Trump’s presidency. His taste for action and grandiose outcomes is bigger than his abilities. He needs to find creative ways to keep out of his own way, while plastering his brand on good things that are happening anyway.

Let’s acknowledge that many in Detroit think Mr Trump is bluffing about his car war. If he isn’t, the unwelcome task falls to GM’s Mary Barra. We’d trust no one else among Detroit CEOs to have the gumption to hire a bunch of lawyers and start filing for injunctions the minute after the Commerce Department comes out with a crazy finding that today’s globalised car sector represents a menace to US national security.

The Wall Street Journal