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Trump’s Ignorance Could Lead the Auto Industry to Disaster

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Dec. 4 2020, Updated 10:52 a.m. ET

Trump’s ignorance about the US auto industry

Since President Donald Trump began his presidential campaign, he’s repeatedly targeted the auto industry for hurting the US jobs market.

Initially, he targeted the second-largest US automaker, Ford Motor Company (F), for its decision to move its small car production to Mexico to cut costs. However, his attacks on the auto industry intensified after he was elected.

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Trump versus automakers

After coming into power, Trump kept a close eye on auto companies to make sure they didn’t move their car production out of the United States. On multiple occasions in June 2018, he threatened legacy US motorcycle maker Harley-Davidson (HOG) for its plans to partially shift its production to avoid tariffs.

Similarly, in a series of tweets in November 2018, the president slammed General Motors “for closing plants in Ohio, Michigan and Maryland.” He threatened to cut all GM subsidies, including subsidies given to car buyers when they buy GM’s electric vehicles.

In 2017, the president also warned Japanese automaker Toyota Motor (TM) against constructing a car factory in Mexico.

The pressure could lead to a disaster

In the last three quarters, auto companies including GM, Ford, Fiat Chrysler Automobiles (FCAU), Tesla (TSLA), and Harley-Davidson have faced rises in their manufacturing costs, hurting their profitabilities. The US-China trade war triggered by President Trump has also made it difficult for large US auto companies to operate profitably in China due to steep tariffs.

In the last two years, US auto sales have softened, which has pressured automakers to increase their focus on profit margins. At the same time, the huge investments they’ve made in the United States to please the Trump administration could see them struggling to stay afloat if ongoing concerns about a US economic slowdown or a recession turn into a reality.

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