Beneath the Glitz of a Ford Automobile Launch in China, Fears of a Trade War Remain

Sparkling beneath a hundred flashbulbs, Ford’s newest saloon was presented to the world in the central Chinese megacity of Chongqing on Tuesday, in a symphony of polished paintwork and umbrella-twirling dancers.

The unveiling of the next generation Ford Focus is the American automobile giant’s first ever global launch in China, spotlighting the growing importance of the world’s most populous nation for American companies. It comes as fears of a trade war persist despite conciliatory remarks from Chinese leader Xi Jinping and U.S. President Donald Trump.

Trump has taken aim at America’s current record $375.2 billion trade deficit with China, zeroing in on the disparity between American and Chinese auto import tariffs — 2.5% versus 25% respectively, Trump tweeted April 9 — as an example of “stupid trade.” He has threatened over $150 billion of tariffs against China over the imbalance and alleged pilfering of intellectual property (IP); the Beijing government denies wrongdoing and has vowed to retaliate.

On Monday, Chinese President Xi Jinping agreed to “significantly” reduce U.S. auto import tariffs this year, a move Trump tweeted he was “very thankful for.” But rapprochement was short-lived. China reported the U.S. to the WTO that same day over $3 billion of steel and aluminum tariffs Trump imposed last month. Analysts also doubt whether the auto tariff reduction Xi pledged will happen as China has repeatedly reneged on similar promises in the past.

“U.S. automakers are likely to discover quite quickly that their access to the Chinese market is limited,” a China Association of Automobile Manufacturers official told China’s state-backed Global Times newspaper.

China’s autos market is by far the world’s largest, and its manufacturers have a production capacity of 30 million vehicles annually. The stakes for U.S. manufacturers thus couldn’t be higher, casting a shadow over the Ford launch.

“The two governments have a relationship and we would encourage them to work it out, encourage them to come to some agreement,” Trevor Worthington, vice-president of product development for Ford Asia-Pacific, tells TIME in Chongqing.

Ford only has about 3% of the Chinese market, according to Worthington, and for a firm that consistently ranks in the top five automakers worldwide, it “should be doing much better,” he says. Still, American firms made profits of some $4 billion from Sino-U.S. joint ventures in 2016, according to Chinese officials. In addition, China imported around 273,000 cars from the U.S. — around a quarter of all imports — with a reported value of over $13 billion in 2017. Ford has sold 2.6 million Focus models alone since entering the Chinese market in 2005.

The shifting dynamics of China’s car market reflect the U.S.-China trade relationship more generally. A theoretically communist nation that only began to economically liberalize in the 1980s now wields vast geopolitical and economic clout, yet still enjoys significant preferable treatment regarding trade. When the U.S. supported Chinese accession to the World Trade Organization in 2001, the deal was that the U.S. would slowly gain …read more

Source:: Time – Business


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