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Bigger stakes for Detroit than meets the eye in brewing trade war

Daniel Howes
Detroit News

The Chinese say they’re willing to change the rules that protect their precious auto industry. That’d be the industry companies like General Motors have spent a generation building with Chinese partners because, over there, he who controls the government rules.

President Xi Jinping says he would reduce tariffs on foreign-made cars and trucks. That might mean something if, say, GM exported more than 200 Camaros a year there. The rest of the four million vehicles it sells in China are made in China.

Chinese planners say they would be open to full foreign ownership of their automakers. That would reverse more than 20 years of partnership with Detroit companies – precisely the kind of relationship the government used its heavy hand to broker.

What’s changed here? Depends on who’s asking.

President Donald Trump and his cheering section credit pressure from the guy in the Oval Office. Trump alone has the guts to take on the Chinese, to slap $150 billion in tariffs on exports to the United States. He alone understands that China needs the rich U.S. market more than Americans need China.

Not so fast. There’s a reason the Chinese are suddenly so magnanimous and it has nothing to do with the Twitterer-in-Chief.

After two decades of partnering with GM, Ford Motor, and Volkswagen, China’s own auto industry is maturing – fast.

Some of its biggest players are acquiring prominent global assets and turning them around. Chinese automaker Geely did it with Sweden’s Volvo Cars. They’re taking massive stakes in the industry’s crown jewels; Geely acquired nearly 10 percent of Mercedes-Benz parent Daimler AG, shocking Germany’s power structure.

They’re preparing to enter the rich U.S. market with their own Chinese-built and Chinese-branded cars. Guangzhou Automobile said as much at this year’s Detroit auto show.

These are not passive players patiently earning their way into the automotive Big Leagues like the Japanese did. They’re formidable, with big checkbooks and appetites for risk.

Promising to drop import tariffs on American-made metal doesn’t mean much on the ground. President Xi gives Trump the proverbial sleeves from his vest, Trump gets a win to tout on Twitter, and the trade-off paves the way for China to pocket a more important concession. 

Same for foreign ownership of Chinese automakers.

What’s more likely: that an American automaker already operating in China acquires its partner outright? Or that a Chinese partner steeped in the global industry marshals capital to buy a foreign rival and get a one-way ticket to America?

There are all sorts of political reasons why that probably would not happen. But that doesn’t mean it couldn’t or that it never will. If Trump is playing a long game here, the Chinese are playing a longer one.

That’s one reason Detroit’s automakers are publicly silent about apparent Chinese concessions. They’ve spent enough time in China to know few things can be taken at face value — and that includes telling an American president what he wants to hear.

Daniel Howes is a columnist at The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.

Daniel Howes is columnist and associate business editor of The Detroit News. A former European correspondent for The News, he has reported from nearly 25 countries on three continents and in the Middle East. Before heading to Europe in 1999, Howes was senior automotive writer and a business projects writer. He is a frequent contributor to NewsTalk 760-WJR in Detroit and a weekly contributor to Michigan Radio in Ann Arbor.
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