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As Trump raises trade demands, U.S. automakers must prepare for the worst
Yang Jian | 2018/5/11

SHANGHAI -- U.S.-made vehicle imports from Ford, Lincoln and some German brands are being held up for extra checks when clearing Chinese customs, Reuters reported this week. 

The impact on U.S. as well as other global car brands will be limited as most of their products are produced locally. 

What is worrisome is that as the Trump administration ratchets up pressure on China, anti-American sentiment will likely emerge among Chinese consumers, prompting them to boycott U.S. goods, including cars and light trucks.

It happened to Korean automotive brands last year and to Japanese carmakers in 2012.

In May 2017, South Korea moved to deploy a U.S.-built anti-missile defense system, which China believed would jeopardize its national security. 

The move stoked anti-Korean tensions in China. With Chinese car buyers shunning Korean brands, Hyundai sales tumbled 31 percent while Kia deliveries plunged 45 percent. 

Bilateral relations between China and South Korean have been on the mend since late last year. But the two leading Korean brands still produce well below production capacity in China even though sales started to recover this year.

In September 2012, a territorial dispute between China and Japan over a few tiny islands in the East China Sea triggered widespread anti-Japan protests and calls for boycotting Japanese brands in Chinese cities.

During the protests, many Japanese cars were smashed and a Toyota dealership in the east China port city of Qingdao was set ablaze. Sales of Japanese car brands were battered and didn¡¯t recover until three years later. 

China and the United States do not have territorial disputes. But Trump is girding for a trade war with China. 

After slapping tariffs on steel and aluminum imports in March, he announced plans in April to levy tariffs on up to $60 billion (374 billion yuan) of Chinese goods. 

To defuse trade tensions with the U.S., Beijing pledged last month to slash vehicle import tariffs and phase out limits on foreign ownership of local production joint ventures by 2022. 

The Chinese government has also promised to further open domestic financial markets to foreign investors and better protect intellectual property rights of foreign companies. 

But Trump continues to take a tough stance on trade. China ran a trade surplus of $370 billion with the U.S. in 2017, according to Trump. Last month, he demanded China cut the surplus by $100 billion from June to May next year. 

Last week, he followed that up with a request that the Chinese side slash the trade surplus by another $100 billion a year starting June 2019.

While threatening a trade war with China, the Trump administration has identified shortcomings with other Chinese policies. Last week, the U.S. embassy in Beijing posted a statement lambasting China¡¯s request that foreign airlines recognize Hong Kong and Macao, as well as Taiwan, as Chinese territories. 

The long-standing U.S. policy views mainland China and Taiwan as ¡°One China.¡± Previous U.S. administrations had no problem recognizing Hong Kong and Macao as Chinese territories after the two former colonies of the United Kingdom and Portugal returned to Chinese sovereignty in the late 1990s. 

Beijing is still seeking to resolve the trade war with the Trump administration through negotiations. But Trump¡¯s attempt to pressure China into obedience may backfire and risk stirring up anti-American sentiment for U.S. products among Chinese consumers.

U.S. automakers operating in China need to be prepared if the gloves come off.

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