Donald Trump’s tariff war is a war on America’s future
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[url]https://www.theglobeandmail.com/business/commentary/article-donald-trump-is-killing-americas-future-with-his-irrational-unprovoked/[/url]
Dimitry Anastakis is the Wilson-Currie Chair in Canadian Business History at the University of the Toronto, and the author of Auto Pact: Creating a Borderless North American Auto Industry, 1960-1971 (University of Toronto Press, 2005).
What President Donald Trump calls “reciprocal tariffs,” which the U.S. announced on Wednesday – or “Liberation Day” – risk triggering a global trade war that could harm both the U.S. and international economies. But lost amid all the furor unleashed by the President is a broader truth: Mr. Trump is not only contributing to inflation, stoking economic uncertainty and market volatility and straining international relations; he’s also hobbling America and its most important industry – the auto sector – at the worst possible time.
It’s often said that this or that particular moment represents a paradigm shift in history. In the 1910s, Henry Ford ushered in the second industrial revolution of mass production and consumption with his use of the moving assembly line, new production techniques, vertical and horizontal integration, and economies of scale. The result was “Fordism” and all of its immense consequences; as Ford arrogantly put it, “I invented the modern age.”
From the 1960s to the 1980s, Eiji Toyoda’s Toyota Production System or TPS, improved upon Fordism by utilizing just-in-time, continuous self-improvement, and lean production techniques. Combined with new labour approaches and advancing computerization, the auto industry – and much of society – was reshaped once again.
Since the 2000s, we are in the midst of another pivotal shift: Industry 4.0, the fourth industrial revolution, is the embrace of robotics and advanced production processes, digitization, computerization, AI , and new materials and propulsion systems. But the electric vehicle (EV) revolution is not just a technological leap forward that represents the future of the auto sector and mobility, it is a strategic imperative in the competition with China, and an essential part of the response to the challenge of climate change.
If Mr. Trump’s goal is to ensure that America loses the race for the fourth industrial revolution, he’s certainly doing a bang-up job.
It began with the President attacking the EV measures passed by the last administration through the Inflation Reduction Act and other initiatives,Mr. Trump is completely hamstringing essential government support for this transition – one that is akin to the greatest tech upgrade in history. Unravelling the economic support for EV/battery manufacturing in the U.S. – even billions of dollars for red states– will unquestionably put America even further behind the Chinese, whose companies such as BYD already dominate the global EV market, and whose technological lead in the sector can be seen in the astounding number of patents the country is producing
Meanwhile, Mr. Trump’s policies that attack American universities and drain research funding undermine one of America’s greatest engines of innovation, and trashes a comparative advantage that the U.S. has held for decades – certainly since the 1930s, when Germany’s shift to fascism killed its own academic advantage
But the tearing down of what could have been a golden age for the United States truly got into gear with Mr. Trump’s irrational and unprovoked tariff war upon the integrated North American auto sector – and a USMCA regime that he himself created – is cratering private investment, prompting auto companies to delay the introduction of major new vehicles, and making the cost of doing business in the auto sector untenable. Mr. Trump may be targeting Canada and Mexico to force “reshoring” of auto manufacturing, but he’s simply causing industrywide chaos that results in production uncertainty and delays, such as that of the next generation Ford F-150, North America’s best-selling vehicle.
Even if Mr. Trump’s “tariffs to force reinvestment” plan was eventually to come to fruition, it would mean a destructive restructuring of the North American sector, one that would effectively “destroy the village in order to save it.” Estimates are that the cost to automakers of abandoning existing facilities in Canada and Mexico would be north of $50-billion Worse, it would take years to build new factories, find new workers and rebuild shattered supply chain networks.
Moreover, forgoing the already existing benefits that automakers gain from building across North America – labour costs, specialization, currency rates, etc. – will put American companies such as GM and Ford even further behind. Mr. Trump might think that he is attacking Canada and Mexico, but as Ford CEO Jim Farley has stated, tariffs will “blow a hole” in the U.S. sector.
All told, Wednesday’s announcement compounds what is already a recipe for disaster. By attacking Canada and Mexico with tariffs, Mr. Trump spikes inflation, chills investment and ultimately destroys American automakers’ home-field advantage just when they need certainty and stability; by cutting the IRA measures to spite Joe Biden, Mr. Trump only pushes America further back in the EV race, and basically abandons the field to the Chinese; by gutting universities, he gives away a long-standing strategic advantage in research and development and soft power. Once these advantages are gone, they’re not coming back.
And if Mr. Trump thinks that putting his eggs in Elon Musk and Tesla’s basket ) is enough for the U.S. to keep pace, he’s about to face a rude awakening. Just as the President is enthusiastically destroying America’s Industry 4.0, Mr Musk is busy single-handedly orchestrating the greatest destruction of brand value in business history as Tesla’s sales crater, protests mount, the company has little new future product coming down the pipe, and the Cybertruck is a disaster
In some ways, it is a great irony that Tesla, once seen as the American avatar of the fourth industrial revolution, has instead become a symbol of the now well-known adage that ETTD – “everything Trump touches dies.”
In this case, far from any “Liberation Day” or “Golden Age,” Mr. Trump is killing America’s technological and economic future.
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[url]https://www.theglobeandmail.com/business/commentary/article-donald-trump-is-killing-americas-future-with-his-irrational-unprovoked/[/url]
Dimitry Anastakis is the Wilson-Currie Chair in Canadian Business History at the University of the Toronto, and the author of Auto Pact: Creating a Borderless North American Auto Industry, 1960-1971 (University of Toronto Press, 2005).
What President Donald Trump calls “reciprocal tariffs,” which the U.S. announced on Wednesday – or “Liberation Day” – risk triggering a global trade war that could harm both the U.S. and international economies. But lost amid all the furor unleashed by the President is a broader truth: Mr. Trump is not only contributing to inflation, stoking economic uncertainty and market volatility and straining international relations; he’s also hobbling America and its most important industry – the auto sector – at the worst possible time.
It’s often said that this or that particular moment represents a paradigm shift in history. In the 1910s, Henry Ford ushered in the second industrial revolution of mass production and consumption with his use of the moving assembly line, new production techniques, vertical and horizontal integration, and economies of scale. The result was “Fordism” and all of its immense consequences; as Ford arrogantly put it, “I invented the modern age.”
From the 1960s to the 1980s, Eiji Toyoda’s Toyota Production System or TPS, improved upon Fordism by utilizing just-in-time, continuous self-improvement, and lean production techniques. Combined with new labour approaches and advancing computerization, the auto industry – and much of society – was reshaped once again.
Since the 2000s, we are in the midst of another pivotal shift: Industry 4.0, the fourth industrial revolution, is the embrace of robotics and advanced production processes, digitization, computerization, AI , and new materials and propulsion systems. But the electric vehicle (EV) revolution is not just a technological leap forward that represents the future of the auto sector and mobility, it is a strategic imperative in the competition with China, and an essential part of the response to the challenge of climate change.
If Mr. Trump’s goal is to ensure that America loses the race for the fourth industrial revolution, he’s certainly doing a bang-up job.
It began with the President attacking the EV measures passed by the last administration through the Inflation Reduction Act and other initiatives,Mr. Trump is completely hamstringing essential government support for this transition – one that is akin to the greatest tech upgrade in history. Unravelling the economic support for EV/battery manufacturing in the U.S. – even billions of dollars for red states– will unquestionably put America even further behind the Chinese, whose companies such as BYD already dominate the global EV market, and whose technological lead in the sector can be seen in the astounding number of patents the country is producing
Meanwhile, Mr. Trump’s policies that attack American universities and drain research funding undermine one of America’s greatest engines of innovation, and trashes a comparative advantage that the U.S. has held for decades – certainly since the 1930s, when Germany’s shift to fascism killed its own academic advantage
But the tearing down of what could have been a golden age for the United States truly got into gear with Mr. Trump’s irrational and unprovoked tariff war upon the integrated North American auto sector – and a USMCA regime that he himself created – is cratering private investment, prompting auto companies to delay the introduction of major new vehicles, and making the cost of doing business in the auto sector untenable. Mr. Trump may be targeting Canada and Mexico to force “reshoring” of auto manufacturing, but he’s simply causing industrywide chaos that results in production uncertainty and delays, such as that of the next generation Ford F-150, North America’s best-selling vehicle.
Even if Mr. Trump’s “tariffs to force reinvestment” plan was eventually to come to fruition, it would mean a destructive restructuring of the North American sector, one that would effectively “destroy the village in order to save it.” Estimates are that the cost to automakers of abandoning existing facilities in Canada and Mexico would be north of $50-billion Worse, it would take years to build new factories, find new workers and rebuild shattered supply chain networks.
Moreover, forgoing the already existing benefits that automakers gain from building across North America – labour costs, specialization, currency rates, etc. – will put American companies such as GM and Ford even further behind. Mr. Trump might think that he is attacking Canada and Mexico, but as Ford CEO Jim Farley has stated, tariffs will “blow a hole” in the U.S. sector.
All told, Wednesday’s announcement compounds what is already a recipe for disaster. By attacking Canada and Mexico with tariffs, Mr. Trump spikes inflation, chills investment and ultimately destroys American automakers’ home-field advantage just when they need certainty and stability; by cutting the IRA measures to spite Joe Biden, Mr. Trump only pushes America further back in the EV race, and basically abandons the field to the Chinese; by gutting universities, he gives away a long-standing strategic advantage in research and development and soft power. Once these advantages are gone, they’re not coming back.
And if Mr. Trump thinks that putting his eggs in Elon Musk and Tesla’s basket ) is enough for the U.S. to keep pace, he’s about to face a rude awakening. Just as the President is enthusiastically destroying America’s Industry 4.0, Mr Musk is busy single-handedly orchestrating the greatest destruction of brand value in business history as Tesla’s sales crater, protests mount, the company has little new future product coming down the pipe, and the Cybertruck is a disaster
In some ways, it is a great irony that Tesla, once seen as the American avatar of the fourth industrial revolution, has instead become a symbol of the now well-known adage that ETTD – “everything Trump touches dies.”
In this case, far from any “Liberation Day” or “Golden Age,” Mr. Trump is killing America’s technological and economic future.
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