The ongoing trade war between the United States and China is complicating the already contentious contract negotiations between the Detroit Big Three and the United Auto Workers union, a number of experts told The Detroit News.
China imposed fresh tariffs on US-made goods last week, including a new 25% tariff on American-made vehicles, which comes in addition to the existing tariff on vehicles made in the US and brings the total taxed amount to just under 50%.
The trade row has cast a shadow of uncertainty over the automotive industry. Not only do automakers source some parts from China, the country is also the world’s largest automotive market, so the economic situation there can have a major affect on their global business strategy.
Now the Big Three must hash out a contract whilst being uncertain about the health of the world’s largest automotive market. Complicating the issue is the UAW’s firmly-held desire to secure raises for its members – a concession it says is justified by the success companies like General Motors and Ford have experienced in recent years.
“The overall interaction of trade, fuel economy and the economy overall, plus the demand for vehicles over the next four years, makes for a very difficult environment to negotiate an agreement,” Kristin Dziczek, vice president of the Center for Automotive Research, told The Detroit News.
In response China’s recently imposed tariffs, president Donald Trump ordered American companies to “start looking for an alternative to China,” with regards to business and to begin making more products in the USA.
“We don’t need China and, frankly, would be far better off without them,” the president said in a tweet.
Pulling out of China isn’t really an option for GM, however. While the US still generates most of the automaker’s profits, the bulk of its sales are done in China, so the country has the largest growth potential for the company. Without China, investors would have little reason to believe in GM’s growth potential.
Meanwhile, a strike authorization vote is being held at UAW local offices across the United States. While the strike vote does not necessarily mean the UAW will strike, a ‘yes’ vote would mean that UAW officials are able to threaten automakers with strike action whilst at the negotiating table. The results from the strike vote are expected to be released this weekend.
Source: The Detroit News