President-elect Donald Trump reiterated Tuesday his threat to impose punitive new tariffs on imports, singling out General Motors for assembling some of its Chevrolet Cruze models in Mexico and selling them in the United States.
“General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border,” Trump tweeted. “Make in U. S. A. or pay big border tax!”
GM manufactures Cruze sedans at a factory in Lordstown, Ohio. But last year, the company introduced a hatchback model that is made in Mexico and is largely sold in international markets. GM spokesman Pat Morrissey said the company also made the hatchback available to U.S. dealers.
GM sold about 190,000 Chevy Cruze models in the country in 2016, and about 4,500 were the Mexican model, he said. GM sold about 30,000 Cruze hatchbacks around the world last year.
“The hatchback is a very small volume vehicle,” Morrissey said. “There’s just not a lot of demand for it.”
Trump previously slammed rival automaker Ford for manufacturing some of its vehicles south of the border. On Tuesday, Ford chief executive Mark Fields announced the company has canceled plans to invest $1.6 billion into a new plant in Mexico, instead pouring a little less than half that amount into producing electric and self-driving vehicles at facilities in Michigan and Illinois.
The move is expected to create 700 jobs in the United States, Fields said. But Ford still intends to expand its manufacturing in Mexico, announcing at the same time that the next-generation Ford Focus will be built at an existing facility there to save on costs.
“When it’s a close judgment call, maybe people are tilting more toward the side of U.S. production, not necessarily because they anticipate any specific policy change but because they don’t know what the policy environment is going to be like and they’re afraid to find out,” Alan Cole, an economist at the Tax Foundation, said.
The Cruze sedan manufactured in Lordstown has suffered from declining demand. In November, GM announced it would eliminate the factory’s third shift, cutting 1,245 salaried and hourly workers in the process. The jobs will end this quarter. The plant currently employs about 4,500.
“We are not reducing a shift based on quality or performance,” wrote Scott Brubaker, chairman of United Auto Workers Local 1714, one of the two that represent the factory, in a message to members posted on the union website. “Unfortunately, the market dictates our livelihoods, and this is a business that changes based on consumer demand. To date, small cars as well as all passenger vehicle sales are slowing due to the strong market demand for SUV’s and trucks. The auto industry is a cyclical business and hopefully, the tide will eventually turn in our favor.”
Under the North American Free Trade Agreement, the United States does not impose tariffs on products imported from Mexico and Canada, but renegotiating the long-standing treaty was one of Trump’s key campaign promises. Since his election, he has attempted to claim credit for saving or creating thousands of U.S. jobs, but the details of the deals are not so straightforward.
Trump boasted that telecom giant Sprint was bringing back 5,000 American jobs. Instead, the company is working with third-party vendors that manage its call centers to move work to the United States. Trump claimed he had stopped Ford from moving a Kentucky plant to Mexico. The automaker said it had never planned to shut down the factory but had intended to replace production of the Lincoln MKC with more Ford Escapes. And after Trump announced that more than 1,000 jobs would remain at a Carrier factory in Indiana, workers at the plant found out the actual number was closer to 800.
Trump’s tweet Tuesday about GM does not make clear whether he is calling for a targeted tax to punish individual companies that shift production out of the United States or for a blanket tariff on imports. Trump has repeatedly said he would slap a 35 percent tariff on Mexican products, but there is no framework for a broad-based border tax in his proposal to overhaul the corporate tax code.
House Speaker Paul Ryan, R-Wisconsin, has put forth a plan that would fundamentally restructure the way the federal government taxes businesses both at home and abroad. That proposal would allow companies to deduct the cost of goods made in America and sold in other countries. However, businesses that import products for sale in the United States would not be able to deduct that cost. It remains unclear whether such measures would violate World Trade Organization rules.