Well Detroit will become alive again.
US President Donald Trump has imposed 25% tariffs on Canada and Mexico and a 10% tariff on China. On the whole this is not a very good move for the American consumer. Prices will go up which means inflation. The greater risk is the competitiveness of the American economy will take a hit. Over the longer term this will not be good for US competitiveness. More American jobs will be lost than new ones created. Tariff protection forces the consumer to subsidise inefficient domestic producers. The best example of this in the entire world is the highly inefficient Malaysian automobile industry.
Here is Sean Foo with a good analysis of the situation.
This makes the whole world weary of doing business with the United States. When they are not efficient they level the playing field by imposing high tariffs. America becomes an unpredictable trade partner. But what they are doing is to lock in their inefficiencies.
The move is designed to get American factories that moved to Canada and Mexico to take advantage of cheaper productions costs there to shift back their factories to the United States. They were already inefficient which is why they moved to lower cost Canada and Mexico in the first place. So that they could keep their high profit margins despite being less efficient. Now they are being made to move back to the less efficient United States again where they will have to suffer lower margins.
The Chinese are already exporting to the US because they are cheaper and also technologically advanced. If they open more factories inside the US (to avoid tariffs) they will still be able to compete with American factories. More Chinese products will be sold in America, there will be more employment for American workers but local American companies will lose market share.
To put the apple cart upright again, American companies must become more competitive. In the 1980s American car companies lost market share to Japanese car makers who had set up car factories inside the United States. That sparked off plenty of innovation in the American car industry with new technologies etc. But that was also when many US car companies moved to Canada and Mexico.
America is an advanced, technology based economy. The US car makers will have to quickly innovate. But certainly more jobs will be created in the US. Lets see what happens.
