In Trump trade war, firms like GM wind up on both sides

Bloomberg

In imposing sweeping tariffs, President Donald Trump is betting he can give domestic companies a boost while beating back foreign competitors. The problem is figuring out which one is which.
About 40 percent of the cars and trucks that General Motors Co. sells in the US this year, for example, will be imported, according to researcher LMC Automotive. The Detroit-based automaker warned the Trump administration that the imposition of tariffs could force it to cut jobs.
Decades of ever-freer trade and cross-border mergers have led to the domination of many industries by a handful of multinationals dependent on easy flows of raw materials, parts and labor. Non-American companies like Daimler AG and Siemens AG now assemble many of their products inside the US, but often using a large number of imported components, blurring the line between domestic and international operations.
Those companies have invested hundreds of billions — if not trillions — of dollars on the assumption the wheels of global commerce will continue to turn with increasing ease. But Trump appears determined to upend all that, even if he doesn’t fully understand the ramifications. He’s even threatening to withdraw from the 164-member World Trade Organization, the cornerstone of cross-border business, Axios reported, citing people familiar with the matter.
“This is a 1980s trade policy in a 21st century world,” said Diane Swonk, chief economist of Grant Thornton LLP in Chicago. “We operate in a global supply chain now. It’s not possible to punish other countries through trade without inflicting damage on ourselves.”
The president has argued that the tariffs are needed to create a “level playing field” between the US and countries he says have benefited disproportionately from current trading arrangements. In a speech, he lamented having “been very much taken advantage of” as a country, saying: “We’ve lost our companies, we’ve lost our jobs. They build a product, they send it in.”

LOOMING LEVIES
The White House is rapidly turning Trump’s tough rhetoric into reality. Unless the president backtracks, the US on July 6 will impose levies on $34 billion of Chinese imports, many of them parts used by domestic manufacturers of products such as power turbines and marine engines. China will impose countervailing tariffs the same day, less than a week after Canada does the same in reaction to US restrictions on steel and aluminum.
Trump’s views on trade, like many of his political positions, were formed in a different era. Thirty years ago, on Oprah Winfrey’s hit talk show, he complained about the US letting “Japan come in and dump everything.” Japanese companies, he continued, “come over here, they sell their cars, their VCRs. They knock the hell out of our companies.” Replace Japan with China and swap VCRs for iPhones, and the comments sound identical to ones he made on the 2016 campaign trail and repeatedly since.
But the picture has become considerably more complicated in the intervening decades. Germany’s Siemens AG, for example, has 50,000 US workers and generates revenue of about $23 billion there, including $5 billion from exports.
Or take Toyota Motor Corp., the world’s second-largest automaker and a symbol of Japanese industrial might. In the US, Toyota now makes more than a million cars a year and has 10 plants. Those factories are the core of an American operation that employs about 136,000 people, but they’re also dependent on components sourced overseas for reasons of cost or availability.