Stocks and economic indicators in the U.S. and abroad have been on a roller coaster ride for much of past two months, thanks mostly to all of the tough trade talk between the U.S. and China. President Donald Trump has threatened new trade sanctions on China, which prompted Chinese leaders to target U.S. products for new tariffs. But the latest move by China has investors and experts feeling much better. This week, Chinese President Xi Jinping said his country is now open to lowering trade barriers with the U.S. on imported vehicles, prompting an encouraged response by the White House.
In particular, the U.S. auto industry stands to benefit if China follows through on President Xi's words. The current trade deficit for automobiles between the nations is massive---there's a 2.5% tariff on cars shipped from China to the U.S. and a 25% tariff on cars going from the U.S. to China. "I think what President Trump is trying to do, and it seems the leader of China understands that, is trying to bring a more positive trade relationship between China and the U.S.," says David Cole with the Center for Automotive Research. "So while President Trump's approach may seem a little rough, I think they're well underway in putting a deal together that will be positive, and that's particularly true for the auto industry."
Indeed, the stocks of General Motors, Ford, Fiat Chrysler and Tesla all jumped this week after the Chinese president's announcement. That's because of how important China remains as a market for American automakers. "When you look at sales in China, western countries are extremely successful," says Cole. "Just to give you an example of that, General Motors sells three times as many Buicks in China than they do here in the U.S."
Cole tells KTRH that President Trump is right in pointing out that the trade relationship between China and the U.S. has been too lopsided for too long, especially when it comes to the auto industry. "What (fixing) this requires is a trade relationship that is modernized on the basis of what's good for both countries, and that seems to be where this process is heading," he says.