By on January 18, 2018

GAC NAIAS 2018

At this very moment, Chinese-based automaker GAC has a massive booth in the very center of the North American International Auto Show in Detroit. The company has expressed its intent to start importing its vehicles into the United States in 2019. However, 536 miles away (by car), Washington is bemoaning Chinese trade practices — a topic which might be extremely relevant for Guangzhou Automobile Group in the coming years.

On Wednesday, Democratic U.S. Senator Chuck Schumer and President Donald Trump separately criticized China’s trade policy. For automobiles, this translates into Chinese-built cars incurring a maximum 2.5 percent import tariff upon entering the United States, while U.S.-built cars sent East are hit with an average 25 percent tax. 

One way around this is for American manufacturers to partner with a Chinese automaker and assemble vehicles in-country. Of course, this doesn’t bolster U.S. jobs, and it gives the locals a front-row seat on exactly how to build an American car. Unfortunately, there really is no other alternative. Chinese law stipulates that foreign subsidiaries must operate as a 50-50 joint venture with an established Chinese firm.

Trump told Reuters in a Wednesday interview that “we have helped to build China because they have taken out so much money in terms of trade deficits with this country.” He continued by saying “when China or another country charges us 50 percent tariffs — more than that in some cases — and we charge them nothing, that’s not fair. That’s not fair.”

Schumer was in agreement. While he and the president have very little in common politically, they seemingly reached the same conclusion in regard to China’s trade policies. Specifically referencing to GAC’s plants coming to America, Schumer took to the Senate floor on Wednesday to condemn Chinese automotive trade rules as “manifestly unfair, and a typically unfortunate example of China’s rapacious trading policies.”

This could spell fierce opposition for Chinese-based manufacturers hoping to sell in the West. But how critical of an issue it will be in the near future is debatable. While GAC appears more ready than ever to make a move to North America, the company previously stated it wanted to begin selling vehicles in the United States in 2017. Obviously, that earlier goal went unmet.

However, it’s showing at the Detroit Auto Show for this year was a no-nonsense affair — rivaling the likes of Hyundai and Subaru in scale. In 2017, GAC Motor established its North American R&D center in California and hosted job fairs in Silicon Valley, Detroit, and Boston. This year, it announced it will commence another round of recruitment programs in America to attract talent, with a plan in place to attend the annual convention of the National Automobile Dealers Association for the first time in its history.

The automaker has even announced plans to change the name of its flagship Trumpchi brand in the Western market to avoid confusion with the president. While we felt the move was overkill, the company is very serious about it. In Detroit, we referenced the Trumpchi name aloud and a GAC PR representative came over, hands waving, to politely inform us that the name will be altered.

GAC NAIAS 2018

“We look forward to the increasing attention and support worldwide,” said GAC President Yu Jun in a recent announcement. “In our pursuit of the North American market, GAC Motor stands ready to share our high-quality products and work with all of you to create a better life of mobility.”

Are China’s trade-practices unfair to the United States? Yeah, probably. However American-based manufacturers are unlikely to gripe too much, as they don’t want to be shunned from the global car market. That leaves politicians to do the dirty work, and it looks as if they’ve already begun.

[Images: GAC Group]

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40 Comments on “The GAC Effect: Imported Chinese Automobiles Face Fierce Criticism from U.S. Politicians...”


  • avatar
    Asdf

    The US will lose its auto industry to the Chinese. People won’t mind, they’ll be too busy parroting the bromide that the iPhone and iPad are made in China.

    • 0 avatar
      Lou_BC

      The USA is set to loose quite a bit of things to the Chinese. Political myopia as evidenced by the killing of the TPP will funnel upwards of 40% of Pacific trade wealth to China instead of USA. That pact as well as some others were designed to maintain western i.e. USA global dominance. China holds 19 percent of USA Treasury bills, notes, and bonds. There are rumblings in China to sell off those holdings. The USA isn’t in much of a position to dictate anything to China.

      • 0 avatar
        Jeremiah Mckenna

        Yeah, but you don’t really understand how the World works when it comes to the U.S. and the money chain. China doesn’t have anything on us…

        You obviously don’t understand that China is NOT part of the TPP either.

        • 0 avatar
          Big Al from Oz

          Jezza,
          China is 1.3 billion with the potential to have double or even triple the US economy.

          The US will become the second largest economy in a decade or so, in 20 years the Chinese econmy will dwarf the US economy.

          Massive pacts like the TPP will take decades to mature and once in place gives the US more leverage through its economic Allies in dealings. In other words the US will retain most global control over trade.

          The US as the so called leader of the West needs to solidify us. It has the influence to do so to challenge the Chinese and Russians.

          Currently under Trump he is treating his Allies adversarily. This is counter productive in forming a cohesive block to challenge our common threats.

          What I find ironic about the MAGA clan is your closest competitors are also your customers.

          Piss!ng them off like the current trend by Trump will drive business away from the US.

          Would you shop in a store with Trump running it? This how the world sees Trump. The US can’t exist as it has without us customers.

        • 0 avatar
          Big Al from Oz

          Jezza,
          China is 1.3 billion with the potential to have double or even triple the US economy.
          The US will become the second largest economy in a decade or so, in 20 years the Chinese econmy will dwarf the US economy.
          Massive pacts like the TPP will take decades to mature and once in place gives the US more leverage through its economic Allies in dealings. In other words the US will retain most global control over trade.
          The US as the so called leader of the West needs to solidify us. It has the influence to do so to challenge the Chinese and Russians.
          Currently under Trump he is treating his Allies adversarily. This is counter productive in forming a cohesive block to challenge our common threats.
          What I find ironic about the MAGA clan is your closest competitors are also your customers.
          Pi55!ng them off like the current trend by Trump will drive business away from the US.
          Would you shop in a store with Trump running it? This how the world sees Trump. The US can’t exist as it has without us customers.

    • 0 avatar
      DeadWeight

      U.S. Politicians and U.S. Business “Leaders” are some of the most idiotic, short-term (golden parachute) thinking, borderline….nay…full-blown treasonous a$$holes to ever walk the planet.

      “You wanna sell cars in China, round eyes? You must invest massive sums of money in plant and capital expenditures to build high tech facilities, then take on a Chinese Joint Venture Partner (typically a Chinese State Owned Enterprise) so that we Chinese can steal an amount of R&D and patents and technology in 2 decades that in the past would have been impossible to steal, and you will nit say anything to the American People nor will your media, as politicians, business execs, and the elite in America get filthy rich during this process.”

    • 0 avatar
      volvo driver

      The politicians can go suck a dick.

  • avatar
    Big Al from Oz

    I’m not defending China here, but fair is fair.

    The US has in the past and even now forced auto manufacturers to produce in the US.

    The 80s saw Japanese imported cars culled in half forcing US manufacture. Today the 25% chicken tax is offering US manufacturers huge profits on their biggest sellers.

    Even regulations add more weight to large vehicle manufacture in the US.

    What I don’t like is the partnering arrangements to operate in China. China needs to change this.

    • 0 avatar
      Jeremiah Mckenna

      You do realize that Honda, Toyota, Nissan and Mazda were the ones that wanted to come to the States to manufacturer their vehicles, not force. They all adopted the same “Build where you sell” philosophy early on, and it has little to do with administration dealings, but more with the human side of doing business.

    • 0 avatar
      geozinger

      I have to take exception to this. In the 1980’s as part of the Voluntary Import Restraints (operative word: Voluntary) if the Japanese carmakers wanted to import more than their allotment, they were encouraged to set up shop. Some did not immediately set up shop (Mitsubishi, Mazda) and some never did (Suzuki).

      The US did not however, have these companies partner with an existing automaker and they were allowed to use their own suppliers. Had the US wanted, they could have made their rules much more draconian, compared to what did take place. While not entirely laissez-faire, it was a lot better than the situation with China.

      If the tax system and regulatory environment here was so bad for business, why did BMW and Mercedes set up shop in the ’90’s? Our cost to produce was much less than the Eurozone. Why did Hyundai set up here more recently? Allegedly to be able to react to the US market more quickly. Most likely cheaper than importing nearly everything from Korea. But, I have no clue as to why VW built Chattanooga. It seems really close (or at least closer) to their existing plants in Mexico.

      I’m heartened that the Fiat Group decided to come back to the USDM and it seems we may have Peugeot here soon, too. Even as the US is now the second largest market in the world for autos, having these companies set up shop (yes, I know Fiat was a different situation) proves that if they want to sell here, they’ll figure out a way. Chicken tax and unique safety and emissions regulations be damned. Of course, if I were running a car company, I would probably build everything in Mexico, but that’s just my opinion.

      I will agree with you on the partnering arrangements, but that’s how you jump start your technology sector. We wanted to play in their sandbox and those are their rules.

      • 0 avatar
        Big Al from Oz

        Voluntary?

        So the Japanese with their goodness went to the US and went along the lines of, “Geez, we must inrease our unemployment, reduce local business and stop exporting and ask for the tightening of the 25% chicken tax on our US exported vehicles”.

        Give me a break.

        • 0 avatar
          NN

          Al,

          Chicken Tax applies only to pickup trucks & some commercial (open backed) vans. Imported cars are only taxed 2.5%. When the Japanese started setting up shop here in the 80’s, what did they build? Honda Accord. Toyota Camry/Corolla. Eventually Tacoma did come here but the Chicken tax wasn’t what forced their hand to come here. The vast majority of units manufactured in the US by the foreign brands are not pickup trucks. I know you hate the chicken tax but it’s nothing compared to what the Chinese do. High import taxes + required 50% local ownership of domestic production so we can steal your IP. Automotive trade rules with China need to be completely reciprocal.

          • 0 avatar
            Big Al from Oz

            NN,
            Pickups alone represent a huge chunk of the market and profits by the Big 3. Add to that the SUV pickup off shoots that would not exist without the pickups.

            As for the vehicles you mention isn’t the issue. Its the reduction in volume imported by US action.

            But the important aspect of my comment is in relation to a comparison between the US and China.

            I understand everyone wants more in the US and I support this. Its how many commenters want to achieve this and their belief of how the US operates to justify their position. Being honest and educated about these types issues would go along way to MAGA.

      • 0 avatar
        Big Al from Oz

        Voluntary?

        So the Japanese with their goodness went to the US and went along the lines of, “Geez, we must inrease our unemployment, reduce local business and stop exporting and ask for the tightening of the 25% chicken tax on our US exported vehicles”.

        Give me a break.

        • 0 avatar
          geozinger

          That was the name the government used.
          It wasn’t my idea. (Nobody ever asks me about these things…)

          They were already playing along with the chicken tax by sending over trucks without beds and doing the final assembly here.

          They could have refused and faced more actions/sanctions, but they wanted the money.

          Please don’t imply that the US is/was evil for doing this, other countries over time have done the same thing (even the same thing as China does now). Regardless of who’s playing these games, generally speaking, the working man gets the shaft.

          • 0 avatar
            Big Al from Oz

            The US is not nice in business dealings, neither is Australia or any country.

            The US didn’t go around the world “giving” away all with benevolance.

            The US expects in return.

        • 0 avatar
          Sub-600

          You can say that again, Big Al…wait, you already did.

        • 0 avatar
          volvo driver

          You keep repeating the same BS over and over again but you’re not saying anything. Why is that?

      • 0 avatar
        Lou_BC

        @geozinger – I do agree that there are significant differences between how China has approached automotive imports versus the USA.

        Japan’s “voluntary” export restraint program wasn’t voluntary. They were threatened with severe punitive import tariffs. Japan agreed to it because in doing so the cost of the program was effectively shifted to USA consumers. Japanese and domestic vehicles both increased in price. As a rule, that is what happens with tariffs. The end consumer sucks up the difference.

      • 0 avatar
        TCragg

        Slight correction: Suzuki set up shop in Canada (in partnership with GM) and began production in 1989, taking advantage of the FTA to gain tariff-free access to the US market.

    • 0 avatar
      npaladin2000

      “What I don’t like is the partnering arrangements to operate in China. China needs to change this.”

      Why should they? It worked, didn’t it? Their companies got what they needed out of the deal, which was the whole point. It’s protectionist as all hell….and we should have been just as protectionist, apparently.

  • avatar
    Jeremiah Mckenna

    I remember a few years ago, Chinese automakers couldn’t pass our strict EPA/MPG etc standards as well, or more importantly, our crash test standards. I know that this manufacturer is trying to import all BEV’s, but how are they on their crash testing and of course, longevity?

    • 0 avatar
      Big Al from Oz

      Yup Jezza,
      Safe US pickups and SUVs only a decade ago or so were great! Hmm?

      To those who whine about Chinese standards are the same who call EU standards and regulations socialist.

      So, to make all fair everyone uses US standards.

      The US still uses inches, feet, etc (this is based on 12 for our Trump supporters). The World is adopting a set of vehicle harmonisation standards leaving the US and to a lesser degree Canada on their own.

      I don’t like the Chinese government at all. But just laying sh!t on your adversary and not recognising their strength and improvements is what a fool does.

      Chinese vehicle standards are improving rapidly. There is a 5 Star ANCAPP Chinese pickup sold in Australia. Maybe safer than any current US pickup.

  • avatar
    Jeremiah Mckenna

    With heavily government subsidization as well as extremely low wages and currency manipulation, this is an unfair trade. Yes, I know that the U.S. subsidizes the auto industry, especially the BEV factor, but not as much as the Chinese government does.

    • 0 avatar
      Big Al from Oz

      Jezza,
      That was 20 years ago, get with the times.

      • 0 avatar
        Jeremiah Mckenna

        Currency manipulation 2 years ago, not 20 years ago. But they are still doing it today, in 2018.

        Right now, the Chinese government subsidizes their auto industry ten times more than the US. And their Electric vehicles at 23%, compared to the US at 18%.

        • 0 avatar
          Big Al from Oz

          Jez,
          The World is 25 years too late in dealing with China.

          The US with it’s QE manipulated it’s currency hugely by dumping $80 billion a month into the US economy, with I might add the Chinese alot of those Treauries keeping the US economy afloat. The AUD was up to $1.12USDfrom 75c.

          Its not all like a Superman movie good vs evil.

  • avatar
    cicero1

    Chinese car companies doing business in US should have same rules US companies have in China – for cars made in US: they must be at least 50% owned by US company; for all Chinese cars: no protection for intellectual property or design, same tariff level of cars imported to China.

  • avatar
    hpycamper

    Trumpchi? We need the Hongqi!

  • avatar
    Trend-Shifter

    The problem is that China may reduce their tariffs today after their previous tariffs have already accomplished their goals. Too late, damage done!

    The US should have a policy that states “free trade” with a mirror policy. This means we should adopt free trade however implement our trading partners policies if they do not practice free trade. That mirror trade policy should go back to the tariffs and restrictions that were implemented 8 years ago.

    Using that policy, China would be charged a 25% tariff on vehicles today. If China lowered that tariff to zero, it would take 8 years before they would get a zero tariff here.

    • 0 avatar
      Lou_BC

      @Trend-Shifter – “mirror policy” does not necessarily take into consideration national variations. A prime example is the intermittent trade war with Canada over lumber. USA lumber poses little threat to Canada but Canadian lumber is a big concern for the USA. USA companies complain that Canadian lumber is unfairly subsidized when in reality is has nothing to do with subsidies but everything to do with who owns the land. IIRC 96% of USA’s land mass is privately owned. In Canada only 6% of forest land is privately owned.

    • 0 avatar
      Big Al from Oz

      Trend Shifter,
      The US might lose out here as well.

      Trade agreements are about saving money. If a country has lots of oil it would be silly to whine about importing mining equipment.

      I think the US would be worse off with your idea. The manufactured, even lots of health/pharmacueticals, agri would not be exported from the US, costing jobs.

      Then add far more expensive domestically manufactured products would hit the US hard.

      Its makes all warm, fuzzy and patriotic to run the quores I read here, but the reality is the US can’t afford it.

      • 0 avatar
        Jeremiah Mckenna

        People still need to eat the food we grow and use the machinery we make. Do other countries produce food and machinery? Absolutely, but not the quality we produce.

        • 0 avatar
          Big Al from Oz

          Jezza,
          The US will not stop exporting, but it will export less earning less. The purchase of more Made in America will reduce living standards.

          Why does America want to compete with China or Mexican made, especially in the Auto industry, become effective EU competitors first.

          Sort of like a restaurant for the wealthy whining about a McDonalds menu.

          As you stated others are doing what the US is doing, many cheaper. That really is the discussion here. The US doesn’t have a competitive advantage.

          Many in the US feel insecure without total dominance in trade.

          Welcome to what the rest of the world has been experiencing.

          So rather than blaming China and Mexico get off your ass and figure ways to do better.

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