President Donald Trump has said in a television interview that he is prepared to allow Chinese carmakers to build electric vehicles in the United States. Yet, the US auto industry is demanding precisely the opposite: a complete legislative ban on Chinese vehicles.
Is President Trump backtracking on the hardlined opposition against Chinese cars? In an interview with Fox News, he appeared to offer a pragmatic compromise. “If China wanted to come in and open a plant to build their cars here, I’d be okay with that,” he said, and added: “Japan does it, but they hire our people. The big thing is they hire our people.”
No coincidence
So, Trump seems to be prepared to let Chinese carmakers in, provided they hire American workers. That condition is indeed a painpoint for Chinese brands which build foreign factories. In Europe, too, they have been accused of shipping in workers to both construct the factories with the intention of enrolling them as work-force to assemble the cars afterward.
Currently, Chinese manufacturers such as BYD and Geely are effectively barred from the US market. Not merely by a steep tariff wall exceeding 100 percent, but also by Biden-era regulations that ban Chinese-connected vehicle’s software and hardware over national security issues. This led Polestar, for instance, to abandon the U.S. market completely.
Trump’s announcement is no coincidence. Within two weeks he has a planned summit with Xi Jinping in Washington, where a trade deal is under discussion.
A full ban?
US carmakers reacted with alarm. The Alliance for Automotive Innovation, whose members include General Motors, Ford, Toyota, Volkswagen, Hyundai, Honda and Stellantis, urged Congress to pass a law permanently excluding Chinese vehicles from the US market by the end of the year.
The alliance fears that Chinese manufacturers will dump subsidized vehicles with connected software and hardware on thier domestic market. That fear is fueled by a rumour that Trump is willing to yield even further and make its easier for Chinese cars to be sold in the US as part of that deal under discussion with Jinping.
Trump’s biggest frustration would be that Chinese manufacturers start building in Mexico, using the country as a gateway to flood the U.S. market with their cars. That scenario stands a good chance. BYD has been investigating that path as a way to access the North American market.
Diplomatic gesture
Chinese manufacturers are unlikely to accept Trump’s terms. Technology transfer restrictions and political hostility make the US an unappealing destination compared with Mexico, Southeast Asia or Europe. Officially allowing local production could also be a diplomatic gesture with strong symbolic but no tangible effect.
And then there’s the political uncertainty. Building a factory takes three to four years. By then, the powers that be in the White House might have changed altogether. For better, or for worse.
The diplomatic nature of Trump’s watered-down stance, is also illustrated by a letter from his administration sent to Jim Farley from Ford only last week. The CEO was urged to untie the network of collaborations he had put in place with Chinese partners. Among them is the battery plant in Michigan, which produces CATL-licensed batteries. That is exactly such a factory filled with American bluecollars.
