Howes: Trump trade threat over Mexico whipsaws auto industry, again

Howes: Trump trade threat over Mexico whipsaws auto industry, again
Daniel Howes, The Detroit News Published 10:32 p.m. ET April 3, 2019

Cars await shipment at the Port of Veracruz in Mexico. President Donald Trump’s threat to close the U.S,-Mexico border threatens to idle production across the North American auto industry within days.
Cars await shipment at the Port of Veracruz in Mexico. President Donald Trump’s threat to close the U.S,-Mexico border threatens to idle production across the North American auto industry within days. (Photo: Victoria Razo / AFP/Getty Images, Victoria Razo / AFP/Getty Images)

The hits keep on comin’ for the auto industry, courtesy of the Trump administration’s relentless trade whipsaw.

Tariffs on imported steel and aluminum already are blamed for shaving $1 billion-worth of profits from both General Motors Co. and Ford Motor Co. GM says the tariff slap also contributed to the automaker’s decision to close four U.S. plants, drawing repeated rhetorical heat from a POTUS who doesn’t want to hear about linkage between the two.

Repeated promises to slap import duties on foreign-built cars, trucks and SUVs threaten Detroit and its foreign rivals, even as lengthening trade tension with China slows the vehicle market there, the world’s largest, and increases costs for parts built there for use in the United States.

Now comes an even bigger presidential threat: closing all, or some, or the U.S. border with Mexico to stem an influx of migrants said to be overwhelming authorities down there — a move that threatens to interrupt trade flows of roughly $1 billion a day between the two countries.

Even a frantic push to keep open commercial trucking lanes — as the Trump administration is scrambling to do should the president, well, pivot any time now to make good on his threat — poses a real risk to automakers and suppliers operating in a North American market that’s been integrated for more than a generation.

“Congress must get together and immediately eliminate the loopholes at the Border!” Trump tweeted Wednesday. “If no action, Border, or large sections of Border, will close. This is a National Emergency!”

All this from the president who looked to be the auto industry’s best new friend in Washington in who knows how long. Instead, the automakers, their suppliers, dealers and state governments are getting yet one more presidential jerk-around that could hasten production cuts, causing layoffs and weakening financial results.

This is what “Art of the Deal” leverage looks like, a blunderbuss of intimidation whose practical effect could be to impose acute economic pain on the very region and would-be voters Trump needed to capture the White House. And he would need them again in 2020, witness recent campaign stops in Grand Rapids and Lima, Ohio.

Trump campaigned as the CEO who understands business. And CEOs who understand business know that the single biggest thing government can provide is stability in leadership, in policy, in a macro-economic environment that affects short-term results and long-term strategy.

Instead, they get the presidential whipsaw. Over the weekend, he’s says he’s “not playing games” when he says vows to shut down the whole border. By Tuesday, the administration signals its intention to keep the bilateral trade routes open because the president’s economic advisers know just how potentially cataclysmic a fully closed border would be — and how quickly.

The Ann Arbor-based Center for Automotive Research has spent the better part of the week warning just how damaging a closed, even restricted, border could be for a North American auto industry that’s spent a generation refining the just-in-time flow of parts, sub-assemblies and finished vehicles across the U.S.-Mexico border.

An op-ed by CAR’s vice president for industry, labor and economics, Kristen Dziczek, rightly points out that today’s automakers don’t partially build cars, trucks and SUVs in anticipation that needed parts will arrive, someday. And they can’t move production of parts or vehicles in weeks, across borders.

Closing the U.S-Mexico border “to automotive trade would shutter most U.S. assembly lines and much of the parts industry within days,” she wrote in USA Today. CAR estimates that every hour an assembly line is down costs an automaker $1.3 million, “and there are 54 major assembly lines in the United States, so every hour of production is halted costs $70.2 million or about $5.6 billion per week in idled assembly capacity.”

So … to prod the Mexican government to staunch the flow of migrants, the president is mulling a move that would idle a bedrock industry he’s spent more time alienating instead of wooing, especially the hourly folks he considers parts of his electoral base.’

How this dovetails with the central Trump re-elect argument predicated on strong market performance, rekindling growth, broad-based income gains mystifies. But so does the policy whipsaw that keeps hitting the Detroit auto industry hard.

Sooner or later, people will start to notice.

daniel.howes@detroitnews.com

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