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Trade tensions will outlast Trump, China expert warns
David Sedgwick | 2019/1/22

DETROIT -- It would be tempting to blame current trade tensions between China and the U.S. on President Donald Trump, who after all has threatened a 25 percent tariff on imports.

But tensions will persist long after Trump is gone, warned Mary Gallagher, director of the Lieberthal-Rogel Center for Chinese Studies at the University of Michigan.

The two countries have serious differences over issues including intellectual property, theft of trade secrets and other practices, Gallagher told attendees Thursday at the ¡°China Genius Series¡± session of the Automotive News World Congress.

"There are a lot of legitimate U.S. beefs about theft of intellectual property and access to China's market," Gallagher said. "These issues are not going away in the short term."

Gallagher noted that she has studied U.S.-China trade for many years. "I don't think it's too extreme to use terms like 'trade war' and 'tech cold war,'" she warned. "This is the worst that I've seen."

Despite all this, Chinese automakers and suppliers aren't backing away from plans to expand into North America.

Establish niches
Several Chinese executives said Thursday they are eager to establish niches in the U.S. and other global markets ¡ª and that it's essential for their survival.

Yanfeng Automotive Interiors, the world's largest producer of interior trim, appears committed to its sizable U.S. operation. The company has 12,000 employees in North America, says David Wang, deputy general manager of North American operations.

"If you are just in China, it's hard to compete with global suppliers," Wang said. "You have to be close to your customer. You have to get into the global market."

Compared with Yanfeng, Sanhua Automotive is a small fry, with just $50 million in North American sales. But Sanhua, which produces climate control components, has built a plant in Mexico to produce valves and heat exchangers for General Motors and other customers.

A 25 percent tariff on imports from China will hurt Sanhua, but the company isn't backing out of the U.S., said Tiger Lu, president of Sanhua's U.S. operation.

"The tariffs definitely impact our business, but we have a global expansion strategy," Lu said. "This could provide a little speed-up for our expansion."

Taking long view
Chinese suppliers in the U.S. are inclined to take the long view, said Michael Dunne, CEO of the California consulting firm ZoZo Go LLC.

"In the short run, suppliers are taking it on the chin," Dunne said. "Their profits are suffering, but not enough to deter them from staying the course."

To be sure, the tariffs may prove to be a bigger hindrance for Chinese automakers that want to ship vehicles to the U.S. Jack Cheng, executive vice president of startup Nio Inc., says he wants to establish a niche in China before expanding into the U.S.

The company began selling its ES8 crossover last year, and now it's preparing to launch its ES6 model. "It will take some time," said Cheng, when asked about Nio's plans for the U.S. market.

When Nio does launch sales here, Cheng wants to make sure the car's autonomous technology can match Western standards. So Nio is beefing up its U.S. engineering staff.

"We are focusing on autonomous technology," Cheng said. "When we come here, we have to be ready for that."

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