Analysis: US Trade War with China Could Harm Detroit

July 18, 2018—Where Michigan sees a trade partner with China, President Donald Trump sees an “economic enemy,” one intent on overtaking America’s competitive edge by stealing trade secrets. And, as Trump attempts to punish China with tariffs, Michigan’s auto industry is feeling the impact, with its ability to remain competitive highly dependent on international markets like China, noted The New York Times.

“The automotive industry is a global industry,” said Michael O’Kronley, an executive with EV battery-maker A123 Systems, to the newspaper. “If you’re going to supply products into that, you need to be global.”

General Motors currently sells more vehicles in China than it does in the U.S. for example. Companies say they recognize there are risks from sharing their technological secrets with Chinese competitors, but they say they have no choice but to engage with China, the world’s largest auto market.

“You can’t separate” China and Michigan, noted Jerry Xu, a former president of the Detroit Chinese Business Association. “You’re going to kill the industry if you try.”

Michigan is home to more than three-quarters of all automotive research and development that occurs in North America. Meanwhile, China’s progress on auto issues such as autonomous vehicles and new-energy vehicles is surging, thanks in large part to government funding.

To stay competitive, Michigan has recently tried to draw foreign investment from Asia and Europe. Last spring, for instance, as Trump prepared to implement tariffs against China, Rick Snyder, Michigan's governor, welcomed more than 150 Chinese investors to tour the state, and the governor told the delegation that his state was “open for business.”

It goes without saying, the next few months will be key for Detroit, as China reacts to the tariffs the U.S. has imposed on many of its imported products.