Presidential candidate Donald Trump portrayed himself as a master negotiator who will be able to redress the country's bad trade deals with foreign partners. He might consider proving himself in China on behalf of General Motors' (GM) Chevrolet Silverado pickup truck.
With little fanfare, GM said this week it will begin exporting the big pickup to the People's Republic of China. They may only be sold in four provinces, since the vehicle type is banned in most cities due to fears they unduly pollute the air and add to traffic congestion. Given transportation costs for shipping the pickups from North American plants, plus the hefty 25% tariff that China imposes on imported vehicles, GM may not make much or any profit on what looks like an experiment.
Large pickups, the most popular vehicle type sold in the U.S., haven't found much demand overseas. Models like the Silverado, Ford Motor's (F) Ford F Series, Fiat Chrysler Automobiles' (FCAU) Ram, Toyota Motor's (TM) Tundra and Nissan Motor's (NSANY) Titan are idiosyncratic to the big, bold and overstated American way of life. They were designed for urban cowboys, Iowa farmers and lawn sprinkler repairmen.
Such consumer groups aren't conspicuous in China, though who's to say they won't become prominent fairly soon? The country has grown breathtakingly prosperous in a short time and will continue on this path, from all evidence of its enthusiasm for education and commerce. Full-size pickups could find a place in an increasingly consumerist Chinese society, whose citizens more and more visit the U.S. and adopt American cultural traits.
That raises the question of China's protective tariff on auto imports. At the end of the last century, Chinese economic planners reasoned that the only way to develop a homegrown automobile industry would be to restrict vehicle imports while forcing foreign automakers to open Chinese plants with local companies, in effect sharing their automotive design and manufacturing knowledge. The strategy worked brilliantly:China has evolved into the world's largest new-vehicle market.
A few China-based automotive ventures have become so skilled they can export to foreign markets. In September, Volvo announced that it will be exporting S90 luxury sedans built in China to the U.S. and Europe. (Volvo is owned by privately-owned and China-based Geely automotive group.) Likewise, GM said in October that it will be importing a China-made Buick Envision to the U.S.
Free-trade advocates like yours truly see the trend lines as healthy, benefiting the U.S. and China, rather than a ploy that steals jobs from one society or the other, as trade often is portrayed during political campaigns.
One small matter remains to be resolved, however: The unequal automotive tariffs imposed by the two countries on one another's locally produced vehicles. Vehicles entering the U.S. pay about a 2.5% tariff; those entering China, 25%. Perhaps that inequity made sense 30 years ago: China was able to develop a homegrown industry; foreign partners got a ground-floor opportunity to sell to Chinese consumers and, one day perhaps, the chance to export.
Today, we see a different China -- and a different U.S., whose presidential politics have taken an unexpected turn. President-elect Trump, what say you?EN