The May 11 commentary by U.S. Rep. Pete Stauber and White House adviser Peter Navarro (“Trade proposal will put U.S. in a better position”) focused primarily on northern Minnesota’s steel mining industry.
Stauber’s position is understandable; failure to support a major industry in his congressional district would amount to political malpractice.
Navarro’s effort to ride piggyback on Minnesota’s steel industry by projecting local logic onto the international auto industry is more problematic, so let’s start there:
When the administration levied tariffs on steel and aluminum, Ford and General Motors publicly stated late last year that the tariffs had already cost them approximately $1 billion each, or around $700 per vehicle they produced in North America. Since they already used mostly U.S.-sourced steel and aluminum, this is ample evidence that U.S. producers of these raw materials simply used the tariffs to justify steep price increases, which must ultimately be passed on to American consumers.
The worldview of Navarro and the administration is mired in the 1980s, a time when people commonly referred to car manufacturers as American, German or Japanese, etc. Today, the auto industry is without exception an international enterprise; a truly global supply chain gives these companies the best components at the lowest price, which ultimately benefits the consumer. Consider these facts:
• The American-built car with the highest U.S. content is Honda.
• The largest automotive exporter in the U.S. is BMW. (Its South Carolina plant is the biggest BMW assembly plant in the world.)
• General Motors sells and produces more cars in China than in the U.S. (GM imports large numbers of vehicles from China and will be badly hurt by tariffs.)
• Chrysler (now Fiat Chrysler) is no longer American; it is controlled by an Italian group, with headquarters in the Netherlands, but is considered British for tax purposes, and its executive offices are split between Turin, Italy, and Auburn Hills, Mich.
• Virtually all new automobile assembly plants built in the U.S. in the past 20 years have been built by international nameplates. There are 17 such plants in this country, employing 126,500 American workers.
• During the same period, the “Detroit Three” have built their new plants in Mexico, Canada and Brazil. (Their capital investment in the U.S. has been primarily in retooling or in some cases expanding existing plants.)
The evidence clearly shows that new auto industry jobs are being created every day in this country, primarily by international nameplates, most recently at Volvo’s new plant in South Carolina. Like BMW, Volvo was producing for export to China and many other countries. With tariffs just introduced by the administration and similar tariffs introduced by China in response, that is no longer a viable business plan and American jobs will suffer.
There was a time when we could pull up the drawbridge and isolate ourselves from the world. That time is long gone. Efforts such as those promoted by Navarro and the White House will inevitably have serious negative effects for both us and the global trading system. These tariffs — for the moment — appear to be targeting China, but all automotive manufacturers have suppliers on many continents and the collateral damage to all can only result in sharply higher prices. Ultimately, that will lead to lower sales and fewer jobs in the U.S.
There is one thing American soybean farmers and General Motors’ CEO Mary Barra agree on: Tariffs are bad.
Kjell Bergh is chairman and CEO of Borton Volvo Cars and Borton Overseas. Over the past 50 years, he has owned international and domestic automotive franchises in Minnesota and Florida. He was chairman of the American International Automobile Dealers Association in 1995, when the Clinton Administration engaged in a trade war with Japan.