The future of the US auto industry during a trade war

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03:23

Amid the US-initiated trade dispute, China's retaliatory tariffs on imported vehicles has been seen as a game changer to the American auto industry.

Since the supply chain has been affected, automakers have lowered their full-year profit forecasts. Many are also expecting migration. Tesla, the US electric vehicle manufacturer, decided to build a two billion US dollar factory in Shanghai.

CGTN Photo

What kind of future is the US auto industry looking to embrace in a time of trade friction? “We have already seen several announcements from companies that have indicated they were going to build facilities abroad, in China and elsewhere, to manufacture their vehicles to get around this tariff fight”, said Steve Pruitt, Managing Partner at Watts Partners.

A fragmentation is also very likely. “Each of the big markets is setting up great walls, so [manufacturers] have to put different operations within different walls. That's [only] natural”, said Liu Baocheng, Dean of the Center for International Business Ethics from the University of International Business and Economics in Beijing.

In terms of fragmentation, there are two factors affecting it. One is the negotiations under NAFTA concerning rules of origin, the other is whether the US will sign a free trade deal with the EU to match the free trade deal signed between Canada and the EU, according to Marc Busch, Professor from the School of Foreign Service at Georgetown University.

“Those two factors will certainly lead a lot of US auto vendors to entertain the prospect of moving to Canada, which is in my view a much greater issue at the moment than the tariffs China has imposed in retaliation for the 301”, added Busch.

CGTN contributor Gao Zhikai pointed out that if there are zero tariffs, America's auto industry is in no position to compete with those of Japan and Germany; it will be crushed.

“New types of vehicles including electric cars are coming along. If I were to advise President Donald Trump, he needs to wake up to this megatrend”, said Gao. “He needs to really pull all the resources in the US to capture the high ground in the new type of automobiles, rather than imposing tariffs and fighting a trade war on the traditional car industry.”

World Insight with Tian Wei is a 45-minutes global affairs and debate show on CGTN. It airs weekdays at 10:15 p.m. BJT(1415 GMT) with rebroadcasts at 4:15 a.m. BJT(20:15 GMT)