Free Trade

The Trade War Drove American Automaking Jobs to China as Tariffs Stalled U.S. Exports

Further evidence that tariffs simply don't make sense as trade policy. President Joe Biden should take note.

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Former President Donald Trump's trade war sank American manufacturing exports and inadvertently helped shift automaking jobs to China as carmakers, including BMW and Tesla, responded to new uncertainty in global supply chains by moving more manufacturing across the Pacific.

That's just one of the ways that Trump's trade war and "phase one" agreement with China, signed a year ago, seem to have backfired, according to a recent report published by the Peterson Institute of International Economics (PIIE), a trade policy think tank based in Washington, D.C. As President Joe Biden considers which of his predecessor's trade policies to roll back and which to maintain, the report suggests that Trump's tariffs have done significant damage to the very sectors of the economy they were supposed to help.

Chad Bown, a senior fellow at PIIE and the report's author, notes that China had become the second-largest export market for American-made cars by 2017, the last full year before Trump's trade war began. After a series of tit-for-tat tariff increases between the U.S. and China, however, American automotive exports to China fell by more than one-third. Higher tariffs on imported car parts from China raised costs for automakers in America, while China's retaliatory tariffs on American-made cars hiked prices and reduced demand in China.

To avoid those costs and to evade increased uncertainty, some carmakers began shifting their supply chains—but not in the direction the White House was hoping.

BMW, for example, shifted much of the production of its X3 sport-utility vehicle from Spartanburg, South Carolina, to China after reporting that tariffs had cut the company's American profits by about $338 million in 2018. The higher costs imposed by the trade war caused Tesla to announce that it was "accelerating construction" of a new plant in Shanghai.

Overall, the number of American automating jobs peaked in September 2018, shortly after Trump's trade war began, and then declined during 2019 and 2020.

The signing of the "phase one" trade deal with China did little to stop or reverse those shifts. Even though China pledged to increase its purchases of American-made vehicles and car parts as part of the agreement, exports are still lagging well behind their pre-trade war totals, according to the PIIE report.

"The U.S. auto sector provides an excellent illustration of how even temporary trade war tariffs can inflict long-term damage," Bown concludes.

It's also a good microcosm for understanding why Trump's trade war didn't achieve its stated goal of reducing America's trade deficit with China, and why the Biden administration would be wise to abolish those tariffs as soon as possible.

Trump believed that hiking tariffs would reduce America's imports from China, allowing the gap between the value of those imports and the value of America's exports to fall. What he failed to grasp, however, is that many of those imports—especially when it comes to manufactured goods—are materials necessary for making the items that American companies end up exporting back to China: like cars.

Higher costs imposed on imports ended up slowing American exports—and thus the trade deficit actually grew. Meanwhile, companies could avoid the cost of Trump's tariffs by shifting production out of the United States, and some chose to do that.

Biden, so far, seems unwilling to remove Trump's tariffs. By announcing a misguided "Buy American" policy for government procurement, Biden is also expanding on some of the Trump administration's protectionist manufacturing policies.

If the past few years are any indication, all Biden will likely accomplish by this is to further erode America's industrial base by trading away automaking jobs in exchange for the appearance of "toughness."

NEXT: Romney and Cotton Want to Punish Businesses With Minimum Wage Hike and More Immigration Paperwork

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  1. “Former President Donald Trump’s trade war sank American manufacturing exports and inadvertently helped shift automaking jobs to China ….”

    But, but Trump was so famous and his business show was such a big hit for so long.

    “[T]here seems to have been an actual decline in rational thinking. The United States had become a place where entertainers and professional athletes were mistaken for people of importance. They were idolized and treated as leaders; their opinions were sought on everything and they took themselves just as seriously—after all, if an athlete is paid a million or more a year, he knows he is important … so his opinions of foreign affairs and domestic policies must be important, too, even though he proves himself to be ignorant and subliterate every time he opens his mouth.”
    ~ Robert A. Heinlein

  2. Overall, the number of American automating jobs

    Come on, man.

  3. Why discuss what impact the tariffs had on the trade deficit? That gives the impression that trade deficits mean something in the aggregate.

    1. Fictional trade deficits make Baby Trump cry.

  4. The rich are still getting richer.

    1. And Rob-the-Blob Misek STILL denies the holocaust!

      Sane people with a grip on reality don’t deny history, as history is defined by a vast, vast majority of historians, with (in cases like this) boat-loads of evidence. No, historians and history aren’t perfect… Nothing (or hardly anything) is. But your denial of overwhelming consensus history shows some pretty severe paranoia… Everyone is out to “get you” and to trick you, right?
      I am doing a service to readers who aren’t familiar with your paranoia… Let all new (or newer) readers beware, much of what Rob Misek has to say, needs to be examined carefully!

      The Earth is actually flat, and the center of the Universe.
      A secret cabal of Jewish bankers is diabolically manipulating the world towards world-wide communism.
      Space aliens secretly comprise 10% of Earthings, and are twisting us and them towards the day when they will enslave and eat us all!
      The Earth is hollow, with a vast array of large, powerful beings living underneath us.
      Being part of a TINY-TINY elite of humans who know the “secret truth” is the other element of your serious whack… Paranoia, and “special elite knowledge”… The later is evidence of mania, of egomania… Some serious self-examination on your part, would be in order!

      You can show Rob Misek an endless parade of well-documented history books about the holocaust, interviews with a few survivors, and video of walking tours of holocaust museums and preserved genocide sites (gas chambers etc), photos of starved corpses stacked cordwood-style…
      And Rob Misek will “summarize” for you, saying,
      “OK, sure, I’ve heard that before! Ha!…
      ‘Mustache Man Bad’ hyped propaganda!”
      #Mustache_Man_Bad

    2. I’ve gotta hand it to you trolls for giving me another opportunity to demonstrate with evidence of logic and science the lie that is your bogeyman, the holocaust.

      By denying this reality that you can’t refute you demonstrate your stupidity.

      Consider that the German enigma code was broken in 1941 and recently released allied decryption provide physical evidence that Germans were desperately trying to save lives in prison camps from the typhus epidemic.

      Advocates for the holocaust narrative (fuckwits) say the decrypts demonstrate deception by the Germans. Logically they must argue that the Germans who at the same time employed no deception for their military actions must have put a much higher priority on killing Jews than winning the war.

      Assuming you are willing to perform those feeble mental gymnastics, how does that explain how a single Jew survived captivity? Why did Jews get tattoos instead of the bullets allies were?

      Talking about bullshit survivor lies.

      Are you the shlomo whose gramps wrote a book illustrated with pictures of shirtless Jews dragging bodies from the gas chambers to the ovens?

      You dummies don’t know that cyanide is absorbed through the skin and lying shlomo senior would have been dead in hours not collecting financial reparations into his old age.

      When a necessary aspect of a narrative is proven to be complete bullshit, the entire narrative is therefore false.

      1. Also, the Lizard Men stole Donald’s votes!

      2. Wow. I’ve heard about you on this board, but there it is in all it’s naked stupidity for all the world to see. You’ve shown the world just how stupid you are. Wow.

        1. You’re the dipshit unable to refute what I say.

          Hey? How stupid are you?

    3. The poor are getting richer too.

      1. The poor aren’t becoming rich. They’re still poor.

        In fact the gap between rich and poor is widening.

        1. One thing often missed is that “the poor” and “the rich” do not stay the exact same people. And how do you define “poor” and “rich”, and where is the gap? Is it empty?

  5. The purpose of the trade war is decoupling the US economy from China. China is our enemy not our competitor. The sooner this is understood the better.

    1. Welcome to communist USA.

  6. So, we’re moving all our manufacturing to China no matter what happens, and if you dare try and put an end to it, we’re going to move to China faster.

    Ok.

    Good riddance.

    Manufacturers can go fuck off to China. But, when China strongarms them, steals their technology, and then nationalizes their operations, I don’t want to hear a word about it.

    1. That’s telling them. Fuckwit.

      Cancelling is communist strong arming in America. No longer the land of the free.

      Why would anyone come crying to you?

  7. Seriously Boehm, are you so fucking retarded to think that Biden or Democrats actually give any fucks what you or Libertarians think?

    Trump – living rent free in Boehm and Sullum’s heads.

    1. “Biden, so far, seems unwilling to remove Trump’s tariffs. By announcing a misguided “Buy American” policy for government procurement, Biden is also expanding on some of the Trump administration’s protectionist manufacturing policies.”

      This is my shocked face.

      1. How many people did SleepyJoe murder with the China virus this year?

  8. With a few changes they can quickly get some back

  9. > The Trade War Drove American Automaking Jobs to China as Tariffs Stalled U.S. Exports

    Unpossible!

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