Home autos Good times for autos marred by uncertainty coming from White House.

Good times for autos marred by uncertainty coming from White House.


The long-running auto industry boom was supposed to be slowing. Midway through the year, the numbers suggest anything but — for consumers, anyway.

Last month’s seasonally adjusted selling rate hit 17.5 million units, Morgan Stanley said Thursday, surpassing expectations and outperforming the same time last year by roughly 800,000 vehicles. If that’s evidence of a slowdown, Detroit and its foreign-owned rivals would like more of the same, please.

Low unemployment, a buoyant job market, still-cheap credit and a vehicle fleet averaging more than 11 years old keep extending the longest sales streak since Detroit’s Golden Age in the 1960s. Tax cuts and a selectively reduced regulatory burden don’t hurt, either.

But potential complications loom. Proposed Trump administration policy shifts could roil the global supply chain, complicate product planning and drive costs higher for automakers, suppliers and customers accustomed to fairly stable prices.

Threatened tariffs on foreign vehicles and parts, along with proposed rollbacks in federal fuel economy standards, could imperil the industry’s momentum, restrain its ability to create jobs and quash the alleged love affair between President Donald Trump and the heartland industry he claims to support.

In fact, it already has, judging by the industry’s resistance to Trump’s tariffs and the Environmental Protection Agency’s plan to ease Obama-era emissions rules and establish a single national standard. That would invite certain litigation from California, whose exemption from the Clean Air Act allows it to set tougher emissions standards also followed by a dozen other states.

Should California and its coastal followers prevail in court, automakers foreign and domestic would be forced to meet two sets of standards with separate engineering solutions, inflating costs and potentially slowing innovation. That’s why auto industry lobbyists and ranking executives insist they are not seeking rollbacks in the existing standards.

It invites uncertainty. Business craves certainty because business makes long-term investment decisions. But the administration’s policy gyrations — tariffs on Canadian and Mexican steel are off until they’re on, levies on imported vehicles would be 25 percent until the president tells Fox News they’d be 20 percent — deliver nothing but uncertainty.

That’s not good. Not when Barack Obama is president, not when George Bush is president, and not when Trump is president. Business leaders, financial markets and foreign governments abhor chaotic, unpredictable decision-making — precisely the style Trump has brought to the Oval Office and wielded with mixed results.

Still, the president is highlighting a point too easily dismissed by traditionalists backing the post-World War II consensus on the benefits of global trade. Times have changed, and the Marshall Plan that helped former enemies like Germany and Japan rebuild their economies is long gone even if some of the assumptions underpinning it remain.

They’re back, but the rules governing, say, trade in autos don’t necessarily reflect it. Vehicles produced in Germany, the undisputed powerhouse of the EU, are assessed a 2.5-percent duty to enter the United States, but American-produced vehicles get hit with 10-percent tariffs to enter the EU.

Now, it’s true that demand for American cars and trucks in Europe is, well, limited. It’s true that only one Detroit automaker — Ford Motor Co. — operates in Europe. But the reason Trump’s pro-tariff take resonates with more than a few people is because the four-to-one imbalance favoring the EU is perceived as “unfair,” to borrow one of his favorite words.

Same for China. Until a reduction to 15 percent in May, its 25-percent tariff on American-made metal was ten times the U.S. tariff on Chinese-made vehicles. With China’s economy second only to the U.S. economy, and with government-mandated plans to dominate a dozen global industries by 2025, does it still qualify as a “developing” economy?

The sensible answer is no. That’s why Trump’s tariffs enjoy more than token support — at least until their unintended, if predicted, consequences bite more deeply into autos and agriculture, Harley-Davidson motorcycles and Kentucky bourbon distillers. 

And that’s where this trade tit-for-tat will get interesting, if not a little unnerving. Trump’s bullying on trade clearly is a negotiating tactic customarily done under some form of diplomatic cover, lest it spook markets, rattle business leaders and scare consumers. 

Whether the president’s tactics will deliver meaningful change to the country’s major trade relationships remains to be seen. But automakers, for one, are learning the road to prosperity for now is paved with bumps and uncertainty.

daniel.howes@detroitnews.comlboccardi@juno.com

(313) 222-2106

Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.

 

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