During a speech on the economics in Savannah, Georgia on Tuesday, former president Donald Trump doubled down on his desire to impose a triple-digit percentage tariff on cars imported to the U.S., allegedly in an effort to increase the number of cars built on American soil. Economic history tends to indicate the opposite, actually, as large-scale tariffs “result in significant declines in domestic output and productivity, higher unemployment, more inequality, and real exchange rate appreciation, implying a loss of international competitiveness, while having only small effects on the trade balance.”
You can watch the whole speech if you want to. I don’t recommend it. If you just want to see Trump’s unhinged rants about the auto industry, skip ahead to around the 11-minute mark. Here’s what he had to say. See if you can make better sense of it than I can.
“Under my leadership we’re going to take other countries’ jobs. Did you ever hear that expression before? Have you ever heard? That we’re going to take other countries’ jobs? It’s never been stated before. We’re going to take their factories, and we had it really rocking four years ago.”
It’s important to remember that four years ago U.S. unemployment was marked at 7.8 percent, as compared to 4.2 percent today. After a quick lie about leading in pre-election polls, he dives into a lengthy rant about the automotive industry.
“Here I am, we’re leading, we’re leading in the polls, we’re leading by a lot. We’re leading by a lot. They said, ‘Oh, we don’t have to worry about him.’ Oh no, they have to worry about me. Boy they don’t like me. You know they used to like Obama. They used to like, they like Biden, you know why? They got away with murder, that’s why they like Biden. They love Biden. Why would you like Biden? Except that they took advantage of him.”
I swear on everything I am, Donald Trump did not take a single breath between that previous quote and this one. I think he may have been talking about China taking advantage of Biden, but it’s not really clear.
“And they think they’re going to sell their cars into the United States and destroy Michigan and South Carolina and North Carolina and Georgia and all of the places that make autos. It’s not gonna happen. We will put a 100 percent tariff on every single car coming across the Mexican border. And tell them the only way they’ll get rid of that tariff is if they want to build a plant right here in the United States with you people operating that plant. We want American citizens and we want their plants built here, not two feet over the border and selling them into our country. We’re not doing that. We don’t do that anymore.”
“A friend of mine who does auto plants, he does auto plants, that’s what he’s great at. He’s great. The biggest in the world. He said, ‘I want to see a plant.’ Pretty recently ago. ‘I want to see a plant, where would we go?,’ he said. Would we go to Detroit? Someplace in Michigan, ideally? He says, “No, you can’t go there, sir. You have to go to Mexico. The big ones are being built in Mexico.’ I said, ‘Why is that?’ He said, ‘Well they have a lot of tax reasons and China’s coming in big and they think they’re going to make their car and sell it in tax free into the United States. But the big ones, if you want to see a big modern plant, come with me to Mexico.’ I said, ‘I’m not interested in going to Mexico. I want those plants built here.’ And that’ll happen.”
While this make believe conversation between Trump and Auto Plant Man is, on its face, ridiculous, it also seems to discount the significant investment in automotive manufacturing currently being made in the States. Panasonic is building a battery factory in Kansas, Ford is building a $5.6B campus in Tennessee, Toyota is investing an additional $8B in its North Carolina battery facility as well as expanding its Kentucky factory, while GM’s Factory Zero in Detroit opened last year and is continuing to expand.
“In fact, when they learn about the 100 or 200 percent tariff, you know, they’ll probably say, ‘Yeah, lets stop construction immediately.’ You’ll see a big difference. I will bring automobile manufacturing back to the highest level in the history of our country. It used to be we were the only place, then it just got chipped away, chipped away. Mostly by China and Japan. And all of a sudden we were down more than 55 percent from where we were years ago. But it’ll be like it was 50 years ago. These jobs they’ll become roaring back. We’re going to be making autos at a level like you’ve never seen before. We’re going to be making cars bigger, better, more beautiful, stronger, faster than ever before.”
“Billions of people around the globe will soon be buying products proudly stamped ‘Made in the USA.’ Or if you prefer, if you have to do it, Made in Georgia, you can do that. And they’ll be exported through the port of Savannah.”
Trump’s declared policies are not only reactionary and jingoistic, but would only prove to be isolationist and anti-competitive. The U.S. has never levied a 100-percent tariff before, and certainly not on something as expensive as an automobile. If imported automobile prices were jumped by a 100 or 200 percent tariff, prices of all automobiles would rise as a result. Without competition in the market from lower-priced Mexican-manufactured vehicles, domestic manufactured vehicles would almost certainly be artificially inflated to increase profits.
Tariffs are not penalties levied against companies, they are giant taxes against the American people. Trump and his voters may love the word tariff, but are they going to love runaway inflation the tariffs cause?
