Despite Trump tweet, Ford says it won’t make hatchback in US

Citing Trump’s new tariffs, Ford on Aug. 31 said it was dropping plans to ship the Focus Active from China to America. (Reuters)
Updated 10 September 2018

Despite Trump tweet, Ford says it won’t make hatchback in US

  • Citing Trump’s new tariffs, Ford on Aug. 31 said it was dropping plans to ship the Focus Active from China to America
  • Trump took to Twitter Sunday to declare victory and write: “This is just the beginning. This car can now be BUILT IN THE USA. and Ford will pay no tariffs!”

WASHINGTON: Ford won’t be moving production of a hatchback wagon to the United States from China — despite President Donald Trump’s claim Sunday that his taxes on Chinese imports mean the Focus Active can be built in America.
Citing Trump’s new tariffs, Ford on Aug. 31 said it was dropping plans to ship the Focus Active from China to America.
Trump took to Twitter Sunday to declare victory and write: “This is just the beginning. This car can now be BUILT IN THE USA. and Ford will pay no tariffs!”
But in a statement Sunday, Ford said “it would not be profitable to build the Focus Active in the US” given forecast yearly sales below 50,000.
For now, that means Ford simply won’t sell the vehicle in the United States. Kristin Dziczek of the Center for Automotive Research said that Ford can make Focuses “in many other plants around the world, so if they decided to continue to sell a Focus variant in the US market, there are several options other than building it in the United States.”
In April, Ford announced plans to stop making cars in the United States — except for the iconic Mustang — and to focus on more profitable SUVs. It stopped making Focus sedans at a Wayne, Michigan, plant in May. The plan, said industry analyst Ed Kim of AutoPacific, was to pare down the Focus lineup to Active wagons and import them from China.
“Without the tariffs, the business case was pretty solid for that model in the US market,” Kim said.
Demand for small cars in the US has been waning for years with relatively low gasoline prices and a shift from cars to SUVs and trucks.
If Ford sold fewer than 50,000 Focus Active wagons per year, it would run a US factory on only one shift per day, which isn’t cost-effective, Dziczek said. Automakers like to run plants on at least two shifts, and preferably three per day to cover the cost of building and equipping the factory, and to turn a profit.
Ford also wouldn’t want to spend millions on equipment to build the Focus Active here because at low sales volumes it wouldn’t get a good return on its investment, Dziczek said.
If sales were high enough to justify production at a US plant, the price of a compact vehicle isn’t high enough to cover the difference in wages here, she said.
“The margins are very slim,” Dziczek said. “Even if you had demand and volume, it’s still very difficult to build a small car in the US profitably, which is why you find very few of them here.”
In China, labor costs are about $8 per hour including benefits, but it’s more than $52 per hour in the US, according to Dziczek.
Ford, BMW, Mercedes and others export about 250,000 vehicles to China from the US each year, Dziczek said. Most of them are luxury cars and SUVs with higher profit margins that can cover higher US wages, she said.
For the Focus Active, the tariffs on Chinese vehicles changed everything. The United States on July 6 began imposing a 25 percent tax on $34 billion in Chinese imports, including motor vehicles. Last month, it added tariffs to another $16 billion in Chinese goods and is readying taxes on another $200 billion worth. China is retaliating with its own tariffs on US products.
The world’s two biggest economies are clashing over US allegations that China deploys predatory tactics — including outright cybertheft — to acquire technology from US companies and challenge American technological dominance.


Despite agreement, China purchase of US agriculture lags

Updated 10 August 2020

Despite agreement, China purchase of US agriculture lags

  • The two sides are set to meet on Saturday to discuss the deal, American media says

NEW YORK: Seven months after the United States and China signed a preliminary agreement to temper their trade war, Beijing’s purchases of US agricultural goods have yet to reach the deal’s target.

As President Donald Trump readies for a tough reelection battle in November, US media reported the two sides are set to meet beginning August 15 to discuss the deal, which calls for China to sharply increase buying American goods and services this year and next.

But according to data compiled by the Peterson Institute for International Economics (PIIE), Chinese agricultural purchases at the end of June were far from where they should be at this point in the year.

They had reached only 39 percent of their semiannual target, according to US figures, or 48 percent, based on Chinese figures.

“If we get back to what the level of trade was in 2017, we’ll be lucky,” said Chad Bown, a PIIE senior fellow who authored the study, referring to the year before the trade war began.

Under the deal’s terms, China agreed to increase agricultural imports $32 billion over the next 2 years from 2017 levels.

Chinese orders for corn and soybeans have increased since mid-July, with Beijing buying just over 3 million tons of American oilseeds between July 14 and Aug. 7, according to US Department of Agriculture data.

At the end of July, the United States reported the largest-ever daily order by China for its corn, of 1.9 million tons.

The announcements were a relief to US farmers, who are expecting a bumper crop this year and need to find buyers to take it.

They also came at a time of high political tension between the two countries, after the Trump administration authorized sanctions against several Hong Kong leaders over the rights crackdown in the city, and restrictions on Chinese apps WeChat and TikTok.

The Chinese “realize we’re not being the best of buddies right now, but they need the products and they’re gonna take as much as they need,” said Jack Scoville, agricultural market analyst for Price Futures Group.

It’s possible that Beijing will change its orders from buying this year’s harvest to next year’s.

But analysts warn that any orders could be called off before the ships carrying them leave port.

Brazil and Argentina, two of the world’s largest soybean and corn producers, are starting their harvests next spring, said Brian Hoops, president of the brokerage firm Midwest Market Solutions.

China “could cancel all these purchases they made in July and buy at much cheaper prices if that’s available to them,” Hoops said.

The trade deal dubbed “phase one” and signed in January has managed to survive both the tensions and the sharp global economic downturn caused by the coronavirus pandemic, which has badly hit international trade.

US Trade Representative Robert Lighthizer in June said China would follow through on its commitments, while Washington would also pursue a “phase two” trade deal that “will focus on issues of overcapacity, subsidization, disciplines on China’s state-owned enterprises, and cyber theft.”

Bown said any success in getting China to buy not just farm but also energy and manufactured goods, would aid Trump in his reelection campaign.