This time last week, from a time zone five hours ahead of Washington, DC, I was writing last week’s column, one eye on the tv, while awaiting the inauguration of US President Donald J Trump. As, no doubt, possibly in fear and trepidation, were many in the auto industry. What’ll the new prez do? Will he really slap a 35% tariff on imports from Mexico? Will The Wall really be extended the full length of the US-Mexico border? Will the shutters go down – big clampdown on immigration – at Fortress US? Etc.
Search ‘Trump’ on just-auto and you’ll see we published at least 12 articles mentioning the new president in this past week (and even worked the word into a review of VW’s revamped UK Amarok truck line). Ready for a few chills down the spine? Just today, we reported on speculation the US could impose a 20% tariff on imports from Mexico to pay for the new president’s commitment to build a wall to enhance security on the US-Mexico border. However, there could also be a more subtle change to corporate taxation through a ‘border adjustment’ aimed at encouraging exports. White House press secretary Sean Spicer has suggested that a deal is close on a corporate tax reform that could include just that. The adjustment would tax imports and also exclude revenues from exports from the profit figure used to calculate corporation tax. It would resemble a VAT (value added tax; consumers pay 20% on most items here in the UK; businesses can claim it back). You get the impression straining of diplomatic relations is not too much of a concern of the new management – reports citing remarks from Trump administration officials suggest that a number of options are being assessed regarding trade with Mexico and that country’s president Enrique Peña Nieto cancelled a planned meeting with Trump after the US president signed an executive order to begin the process of building the border wall. He has said repeatedly Mexico will pay for it.
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Our business editor, Simon Warburton, is a seasoned traveller in Russia, regularly attending industry events and seminars, he’s even been asked to moderate panel discussions. So who better to eye the Trump-Putin, US-Russia relationship possibilities? Will Trump and Putin trigger a Russia deep freeze thaw?
It wasn’t just Trump rattling the protectionist sabre. Cue Simon again (he also speaks French) reporting on presidential candidate, Marine Le Pen, throwing her weight behind Donald Trump’s drive to tax vehicle manufacturers into relocating production back to the US from low-cost economies as she advocates a similar move for France. Revolution redux? German automotive body, VDA, however, said the US would be “shooting itself in the foot,” if Trump makes good on his comments to impose a 35% border tax on imported vehicles. No protectionism, please, is the message from Germany, as you’d expect with BMW and Mercedes plants north of the border and a brand-new Audi plant south. China, long in Trump’s cross-hairs, was also mulled over this week as a Credit Suisse research note opined an all-out trade war between the US and China was ‘unlikely’. The note suggested a proposal in Congress for a tax adjustment on export income might emerge as a viable compromise to assist US exporters while avoiding the risk of retaliation from import tariff hikes.
Toyota, which was on the receiving end of both Trump’s barrels long before the inauguration, mostly over the little matter of relocating next generation Corolla production south to a new plant in Mexico, was also in the news as president Akio Toyoda was reported to be ‘thankful and encouraged” Trump has Mike Pence as his vice president. Toyoda reportedly reckons Pence is someone who “understands what we do, and listens to us” and added the new Veep “understands that Toyota is a company loved in the region [it operates in], and I am thankful and encouraged [for Pence’s presence]”. Pence is a former governor of Indiana, where Toyota has a factory. So one guess where the automaker said this week it was adding 400 jobs? On the night before the Big Three CEOs had breakfast with the new president and were ‘encouraged’ to increase production in the US and boost employment.
But not everything Trump announced this week was the opposite of what the autobiz wants. Ford CEO Mark Fields strongly supported Trump’s swift action to sign an executive order to take the US out of the Trans-Pacific Partnership (TPP) trade deal. In remarks made after the heads of the Detroit Three met with Trump, Fields referred specifically to the TPP and focused on its failure to deal with currency manipulation, something he described as the ‘mother of all trade barriers’. “I would just call out the president’s decision to withdraw from the TPP,” Fields said as he addressed reporters outside the White House. “We have been very vocal, as an industry and a company, and we have repeatedly said that the mother of all trade barriers is currency manipulation. TPP failed in dealing meaningfully with that and we appreciate the president’s courage to walk away from a bad trade deal.”
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By GlobalDataWhile we’re in Dearborn, it’s worth mentioning the blue oval’s financial results for 2016 came in – a challenging year, you might say, but profit is profit, especially when it’s $2.8bn. Net.
Although protests are ongoing, it’s starting to look like business is now in acceptance mode concerning The Donald. ‘We didn’t want him in, but he is, so best to get with the plan and work with, rather than against, the new administration.’ Barring the (previously experienced in the US) unforseen, like unexpected illness, impeachment, or assassination, it’s Trump in charge ’till early 2021, like it or lump it.
The next four years are going to be very interesting.
Have a nice weekend.
Graeme Roberts, Deputy Editor, just-auto.com
