President-elect Donald Trump reiterated Tuesday his threat to impose punitive new tariffs on imports, singling out General Motors for assembling some of its Chevrolet Cruze models in Mexico and selling them in the United States.
General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax!
— Donald J. Trump (@realDonaldTrump) January 3, 2017
GM manufactures Cruze sedans at a factory in Lordstown, Ohio. But last year, the company introduced a hatchback model that is made in Mexico and is largely sold in international markets. GM spokesman Pat Morrissey said the company also made the hatchback available to U.S. dealers.
GM sold about 190,000 Chevy Cruze models in the country in 2016, and about 4,500 were the Mexican model, he said. GM sold about 30,000 Cruze hatchbacks around the world last year.
“The hatchback is a very small volume vehicle,” Morrissey said. “There’s just not a lot of demand for it.”
Trump had previously slammed rival automaker Ford for manufacturing some of its vehicles south of the border.
Ford CEO Mark Fields told employees Tuesday that the company has canceled plans to invest $1.6 billion in a new plant in Mexico, instead funneling a little less than half of that amount into producing electric and self-driving vehicles at facilities in Michigan and Illinois. The move is expected to create 700 jobs at a plant in Flat Rock, Mich., Fields said. But at the same time, Ford also announced plans to expand production at a separate facility in Mexico.
Alan Cole, an economist at the Tax Foundation, said uncertainty has played part in these decisions. “When it’s a close judgment call, maybe people are tilting more toward the side of U.S. production, not necessarily because they anticipate any specific policy change but because they don’t know what the policy environment is going to be like and they’re afraid to find out.”
The Chevy Cruze sedan manufactured in Lordstown has suffered from declining demand. In November, GM announced it would eliminate the factory’s third shift, cutting 1,245 salaried and hourly workers in the process. The jobs will end this quarter. The plant currently employs about 4,500.
“We are not reducing a shift based on quality or performance,” wrote Scott Brubaker, chairman of United Auto Workers Local 1714, one of the two that represent the factory, in a message to members posted on the union website. “Unfortunately, the market dictates our livelihoods and this is a business that changes based on consumer demand. To date, small cars as well as all passenger vehicle sales are slowing due to the strong market demand for SUV’s and trucks. The auto industry is a cyclical business and hopefully, the tide will eventually turn in our favor.”
At Ford, Joseph Hinrichs, president of Ford in the Americas, said the decision to produce the newly announced cars in the United States was made recently and without consulting people connected to Trump. Ford Executive Chairman Bill Ford shared the news with Trump in a phone call Tuesday morning, though the details of that call were not immediately available.
While the Ford Focus will soon be produced south of the border, Hinrichs said the 3,500 workers who currently make the car at its production facility in Wayne, Mich., will instead build two yet-to-be-named vehicles, and thus those jobs will stay in place.
The $700 million investment in Flat Rock, Mich., is part of broader plans to Ford to produce 13 electric and self-driving vehicles over the next five years, including hybrid versions of the automaker’s iconic Mustang sports car and F-150 truck. Ford also plans to produce an electric SUV by 2020 that can reach 300 miles on a single charge, an attempt to bring greater fuel efficiency to the bulkier vehicles that many American consumers prefer. A self-driving car intended for use in a ride-hailing fleet will also be produced.
Under the North American Free Trade Agreement, the United States does not impose tariffs on products imported from Mexico and Canada, but renegotiating the long-standing treaty was one of Trump’s key campaign promises. Since his election, he has attempted to claim credit for saving or creating thousands of U.S. jobs, but the details of the deals are not so straightforward.
Trump boasted that telecom giant Sprint was bringing back 5,000 American jobs. Instead, the company is working with third-party vendors that manage its call centers to move work to the United States. Trump claimed he had stopped Ford from moving a Kentucky plant to Mexico. The automaker said it had never planned to shut down the factory but had intended to replace production of the Lincoln MKC with more Ford Escapes. And after Trump announced that more than 1,000 jobs would remain at a Carrier factory in Indiana, workers at the plant found out the actual number was closer to 800.
Trump’s tweet Tuesday about GM does not make clear whether he is calling for a targeted tax to punish individual companies that shift production out of the United States or for a blanket tariff on imports. Trump has repeatedly said he would slap a 35 percent tariff on Mexican products, but there is no framework for a broad-based border tax in his proposal to overhaul the corporate tax code.
House Speaker Paul D. Ryan (R-Wis.) has put forth a plan that would fundamentally restructure the way the federal government taxes businesses both at home and abroad. That proposal would allow companies to deduct the cost of goods made in America and sold in other countries. However, businesses that import products for sale in the United States would not be able to deduct that cost. It remains unclear whether such measures would violate World Trade Organization rules.