The Trade War Drove American Automaking Jobs to China as Tariffs Stalled U.S. Exports
Former President Donald Trump’s trade war sank American manufacturing exports and inadvertently helped shift automaking jobs to China as carmakers, including BMW and Tesla, responded to new uncertainty in global supply chains by moving more manufacturing across the Pacific.
That’s just one of the ways that Trump’s trade war and “phase one” agreement with China, signed a year ago, seem to have backfired, according to a recent report published by the Peterson Institute of International Economics (PIIE), a trade policy think tank based in Washington, D.C. As President Joe Biden considers which of his predecessor’s trade policies to roll back and which to maintain, the report suggests that Trump’s tariffs have done significant damage to the very sectors of the economy they were supposed to help.
Chad Bown, a senior fellow at PIIE and the report’s author, notes that China had become the second-largest export market for American-made cars by 2017, the last full year before Trump’s trade war began. After a series of tit-for-tat tariff increases between the U.S. and China, however, American automotive exports to China fell by more than one-third. Higher tariffs on imported car parts from China raised costs for automakers in America, while China’s retaliatory tariffs on American-made cars hiked prices and reduced demand in China.
To avoid those costs and to evade increased uncertainty, some carmakers began shifting their supply chains—but not in the direction the White House was hoping.
BMW, for example, shift
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