General Motors’ investment in China has come under fire from President Donald Trump who declared in recent interview it was a bad investment.
GM now sells more cars in China than it does in the United States and during the past two decades the company has insisted the investment in China has not hurt its operations in the U.S. Instead, profits from its Chinese operations has helped it invest in new products in the United States and helped it meet pension obligations.
Only a small part of GM production of more than 3 million units is exported back to the U.S. and the Trump administration recently refused to roll back the tariffs on the Chinese-made Buicks GM sells in the U.S.
Trump, however, maintains General Motors made a “bad investment” when it decided to invest in China. GM has invested in China through a series of partnerships with Chinese companies, which also put up some of the funding for the new plans.
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In an interview with CNBC, Trump attacked GM for outsourcing and offshoring thousands of American manufacturing jobs to China and then exporting vehicles back into the U.S.
“If you look at what General Motors did, they moved so much into China. They can’t be happy about paying tariffs like we’re charging, 25% for cars. They built massive car factories, automobile plants, in China,” he said.
“So what happened is China has a tariff of 45%. We have a tariff of basically zero. It’s two-and-a-half percent. But basically, it’s zero. So they sell us a car, it comes right into our country, no problem. We sell them a car, we have to pay 45%. It doesn’t work that way and it’s not going to work that way anymore,” he noted.
However, the volume of complete vehicles exported from China and sold in the U.S. is far, far smaller than Trump suggests since almost all the cars GM and its partners build in China are sold to Chinese customers. Some are also exported to South America.
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Trump suggested that the corporation made a huge misstep by believing the playing field would not eventually be leveled through tariffs on Chinese imports, thus crippling their offshoring, made-in-China business model.
“Well, General Motors does not want to see us put a 25% tariff on China … when they built those plants there was no tariff,” Trump said. The trade war has put pressure on the Chinese economy, which also is shrinking GMs sale and profits.
SAIC Motor Corp. Ltd, GM’s principal partner in China, sold a total of 480,926 vehicles in May this year in China, down 16.3% year on year, according to a statement on the Shanghai Stock Exchange website Tuesday.
SAIC Motor Corp. Ltd delivered a total of 2,470,757 vehicles in the first five months this year in China, down 16.7% compared with the same period last year, according to a statement from SAIC.
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Sales of SAIC Volkswagen Automotive Co. and SAIC General Motors Co both declined. In the first five months, SAIC Volkswagen Automotive Co. sold 765,097 vehicles, down 9.3% year on year. SAIC General Motors Co. delivered 693,683 vehicles from January to May, down 15.2%.
25% isn’t enough. US should match the Chinese tariff of 45%; if they drop theirs, we’ll drop ours to match.
You do realize China had dropped automotive tariffs sharply from the prior 25% before the trade war was launched? They were raised in response to the U.S. tariff increase — and the higher figure only covers American-made vehicles. The US actually ships more vehicles to China than the other way around — or did before the trade war began, anyway.
Paul E,
Did you even bother to read the article??? The vehicles manufactured in China are predominantly sold in China. These tariffs are a joke. You do realize that the tariffs aka alternate tax is paid for by the consumer? So you are basically saying you want to be taxed. You are cheering on our government to tax you. Don’t say “then buy American to avoid” because just about everything made in America has some component or chemical in it that is imported from China. You will pay those taxes no matter what you purchase. All of our American made trucks and cars have components in them purchased from overseas. So far costs for those vehicles has gone up $1500-$2500 plus since these tariffs have gone into affect. Food cost has increased. You Trump supporters haven’t a clue what you are cheering for. Stats were done and all American families can expect to pay an increase in purchased goods of around $800-$1500 more a year. This pretty much erases any tax break you could expect from trump’s tax reforms/corporate tax reform. Yet big business is benefiting from all this. Keep on cheering being screwed by the Trump administration.
Trump supporters?
Curious that we are frequently criticized for being the other.