I acknowledge your sentiment that we need to learn from China and use a combination of massive incentives with tariffs specifically against China and perhaps non-tariff barriers. However, instead of giving credit to Trump for imposing tariff on our best allies, I would give credit to Biden administration and Democrat-led congress for setting up these massive EV incentives and 100% tariff on Chinese EVs.
I may not oppose the strategy to moving manufacturing from Canada/Mexico to the USA but that needs to be strategically planed - just like China's model.
Michael as ever insightful. Thank you for sharing. Perhaps W OEM’s should adopt a JV approach with CN OEM’s. In my opinion this could be a happy compromise. Providing unhindered access to hundreds of millions of consumers simultaneously the host country having ski in the game for the long term. Bundled with a JV would be sharing if technology,R&D plus sourcing of components to a certain percentage from Europe.
Michael, you have told this story well over the years, but the administration and Congress seem ready to ignore or eliminate all the other policy levers we need to follow China’s playbook. Tariffs only with no incentives and no non-market measures will fail spectacularly.
Looking back it is obvious that neither China nor the Collective West acted in good faith as China opened up for business. Both had rather opposing goals when they decided to cooperate economically.
I've had my dealings with China back in the 1990's during negotiations for a Sino-Dutch joint venture. It soon became apparent who had come better prepared. The Chinese delegation kicked our butts back then.
Years later I ran into an old classmate of mine. He had set up shop in China and ran a business in Chongqing for many years, but when the authorities decided that his company was vital to national interests and he was quickly kicked out of the country.
To be fair; this is not uniquely Chinese. I've heard similar stories about Dutch companies in France and the US. Business can be ruthless especially when national interests and geopolitics are involved.
Chinese policy papers are quite revealing. Beijing knew perfectly well what game the Collective West was playing; setting up a cheap western manufacturing hub in China and then controlling everything by dominating the Chinese financial sector.
All true, though Trump's not really playing the tariff game so much as the headline game. Tariffs inside NAFTA-2.0 that he himself negotiated? That's like tariffs between South Carolina and Illinois, no?
You left out the obligatory question, “What would Adam Smith do?” He’d likely say China has a competitive advantage in auto manufacturing because of its superior scale, assuming we call the engineering capabilities a draw. Therefore the US should import cheap Chinese cars and focus its investment dollars on more knowledge-oriented products. Unfortunately that means US underemployment which is a fundamental problem that Smith never tackled. But Donald Trump did, channeling Friedrich List. If you can’t beat ‘em, join ‘em.
Thanks for the insight. Following the author’s logic, India should have been the largest and most advanced car producer in the world, because India imposes more than 100% tariff on all cars imported from other countries since the 1960s.
A narrow-minded and arrogant analysis. One-sided data only reveals stubborn and outdated viewpoints. Have you been to China recently? Do you understand the rapid development of China's EV industry? Do you know that more than half of new car sales in China are already electric vehicles? (Of course, this includes Tesla, but where are Ford, GM, and the other dinosaurs?)
Have you asked Chinese consumers why, at the same price, they prefer a car that offers full autonomous navigation better than Tesla FSD, massage seats, and even built-in karaoke over a so-called "prestigious" imported car? You may not know the answer in your world.
Also, do you know how much the BYD Tang model SUV sells for in China? Around $27,000. And do you know how much the same model sells for in Germany? €45,000! So where is the unfair competition? Where is the dumping? I’ve never heard of unfair competition or dumping being done through higher prices.
Of course, every older Chinese person is familiar with this scenario because, in the past, imported cars in China were sold at prices several times higher than abroad. But that era is over.
So wake up. You're welcome to compete, but not just with words!
Great stuff, as always. I've spend the last 30 years in automotive, tough for me to wake up tomorrow and say, "I'm a knee surgeon now." China's decisions 35 years ago are paying dividends. But the US has made different decisions for 50 years or more, being a free trader. Agree there needs to be change and a new approach, unfortunately our gov. system does not seem to support long terms strategic planning. And current administration has the attention span of a squirrel.
Using tariff as a means to promote industrial policy started with Alexander Hamilton and was practically copied by the rest of the world. Quite clearly, it works. So this is the Trump Administration’s method of reindustrializing the US.
Clockwork logic to a rational conclusion. Well stated.
Thank you for great insightful article.
I acknowledge your sentiment that we need to learn from China and use a combination of massive incentives with tariffs specifically against China and perhaps non-tariff barriers. However, instead of giving credit to Trump for imposing tariff on our best allies, I would give credit to Biden administration and Democrat-led congress for setting up these massive EV incentives and 100% tariff on Chinese EVs.
I may not oppose the strategy to moving manufacturing from Canada/Mexico to the USA but that needs to be strategically planed - just like China's model.
Michael as ever insightful. Thank you for sharing. Perhaps W OEM’s should adopt a JV approach with CN OEM’s. In my opinion this could be a happy compromise. Providing unhindered access to hundreds of millions of consumers simultaneously the host country having ski in the game for the long term. Bundled with a JV would be sharing if technology,R&D plus sourcing of components to a certain percentage from Europe.
Thanks for this post.
(via Bill)
In 5 minutes of reading I learned a lot about the Chinese car Market and Imports!
Top! THX!
Thank you very much. The numbers don;t lie.
Michael, you have told this story well over the years, but the administration and Congress seem ready to ignore or eliminate all the other policy levers we need to follow China’s playbook. Tariffs only with no incentives and no non-market measures will fail spectacularly.
Agree. Need the full arsenal.
Looking back it is obvious that neither China nor the Collective West acted in good faith as China opened up for business. Both had rather opposing goals when they decided to cooperate economically.
I've had my dealings with China back in the 1990's during negotiations for a Sino-Dutch joint venture. It soon became apparent who had come better prepared. The Chinese delegation kicked our butts back then.
Years later I ran into an old classmate of mine. He had set up shop in China and ran a business in Chongqing for many years, but when the authorities decided that his company was vital to national interests and he was quickly kicked out of the country.
To be fair; this is not uniquely Chinese. I've heard similar stories about Dutch companies in France and the US. Business can be ruthless especially when national interests and geopolitics are involved.
Chinese policy papers are quite revealing. Beijing knew perfectly well what game the Collective West was playing; setting up a cheap western manufacturing hub in China and then controlling everything by dominating the Chinese financial sector.
We all know how that worked out.
All true, though Trump's not really playing the tariff game so much as the headline game. Tariffs inside NAFTA-2.0 that he himself negotiated? That's like tariffs between South Carolina and Illinois, no?
You left out the obligatory question, “What would Adam Smith do?” He’d likely say China has a competitive advantage in auto manufacturing because of its superior scale, assuming we call the engineering capabilities a draw. Therefore the US should import cheap Chinese cars and focus its investment dollars on more knowledge-oriented products. Unfortunately that means US underemployment which is a fundamental problem that Smith never tackled. But Donald Trump did, channeling Friedrich List. If you can’t beat ‘em, join ‘em.
Thanks for the insight. Following the author’s logic, India should have been the largest and most advanced car producer in the world, because India imposes more than 100% tariff on all cars imported from other countries since the 1960s.
For starters, the underlying (压根）objectives between China's and US's tariffs are starkly different.
A narrow-minded and arrogant analysis. One-sided data only reveals stubborn and outdated viewpoints. Have you been to China recently? Do you understand the rapid development of China's EV industry? Do you know that more than half of new car sales in China are already electric vehicles? (Of course, this includes Tesla, but where are Ford, GM, and the other dinosaurs?)
Have you asked Chinese consumers why, at the same price, they prefer a car that offers full autonomous navigation better than Tesla FSD, massage seats, and even built-in karaoke over a so-called "prestigious" imported car? You may not know the answer in your world.
Also, do you know how much the BYD Tang model SUV sells for in China? Around $27,000. And do you know how much the same model sells for in Germany? €45,000! So where is the unfair competition? Where is the dumping? I’ve never heard of unfair competition or dumping being done through higher prices.
Of course, every older Chinese person is familiar with this scenario because, in the past, imported cars in China were sold at prices several times higher than abroad. But that era is over.
So wake up. You're welcome to compete, but not just with words!
Great stuff, as always. I've spend the last 30 years in automotive, tough for me to wake up tomorrow and say, "I'm a knee surgeon now." China's decisions 35 years ago are paying dividends. But the US has made different decisions for 50 years or more, being a free trader. Agree there needs to be change and a new approach, unfortunately our gov. system does not seem to support long terms strategic planning. And current administration has the attention span of a squirrel.
Using tariff as a means to promote industrial policy started with Alexander Hamilton and was practically copied by the rest of the world. Quite clearly, it works. So this is the Trump Administration’s method of reindustrializing the US.
So sad, it’s 2025 now, I couldn’t believe you writing this without being paid by USAID.
Muke Dunne: Is Trump wrong? Perhaps allow BYD to build cars in the US — but only in partnership with o e of the D3.
Trump is not wrong about China. He understands their playbook. Bring them in a a tightly monitored JV with majority US ownership. Reciprocity.
Ownership is not enough.
Workers must be all American so that tech is actually transferred. Importing Chinese management and workers would defeat purpose of JV requirement.