The once and future president’s love of “The Deal” might outweigh his antipathy toward electric vehicles
I just watched Darkest Hour, the Winston Churchill biopic, for about the 10th time. It came on the boob-tube and me, needing some serious uplifting — my wonky back has taken its worst turn in ten years — thought “what could be better than two hours of Britain battling insurmountable odds, all to the sound of inspiring speeches by Winnie the Pooh?”
What I had forgotten — and, my Lord, how this sounds so familiar today — is that, in director Joe Wright’s telling at least, Winston Churchill was pretty much everybody’s last choice, except, as he would later so famously elucidate, “for all the others.” In perhaps the most dramatic moment of the movie, King George VI — played to great effect by Ben Mendelsohn — makes perfectly clear that Winston was a f@#k-up. An incredibly well-spoken, erudite f@#k-up, but a f@#k-up nonetheless.
There was the disaster in Gallipoli in the First World War; the defeat in Norway at the beginning of the Second; and his opposition to Indian independence in between, none of which were seen as precursors to greatness. He became prime minister under the direst of circumstances, predictions for his success were nil, and pretty much everyone thought England was destined to be left in ruins under his guard. Like I said, eerily familiar. And yet as history books — and the immortality of “We shall fight on the beaches” — attest, Churchill is considered the greatest war-time leader of the last century.
I’ll posit no such grandiosity to Donald Trump. But I will concede that there is a possibility — a decided long shot, to be sure — that, while almost as unlikely as Churchill’s success in the Second World War, he could turn out to be the saviour of electric vehicles in North America. Or, if not the saviour — and cue proponents of battery power protesting that EVs need no saving — then at least an advocate of the cheap, cheerful electric vehicles we so desperately need.
Here’s how he could do it.
Everyone hates China
American politics is like watching oil and water trying to mix: you’ll catch oh-so-brief glimpses of homogeneity, but very quickly the pair disappear into their former rigidly delineated castes. So it is with the Republicans and Democrats.
The one and only exception to this constant stand-off-ishness is China. Everyone hates China. More specifically, everyone hates Chinese electric vehicles. The Democrats’ President Biden touts his pro-union 100% tariff on Chinese-built EVs; President-elect Trump doubles down by promising to tariff Chinese-branded electric vehicles built anywhere (e.g. BYD’s now-delayed EV plant in Guadalajara, Mexico). Both sides agreed on one thing and one thing alone: a “wall” needs to be built around the America, over, under, or through which no battery-powered Chinese car can crawl.
It cannot be overstated how dramatic a shift in American trade policy this would be. For one thing, like Japanese transplants before them, this would allow China’s automakers — again, like BYD — to sell cars in the United States. For another, it would mean the virtual elimination of the current tariffs that will, at the very least, punish consumers and that could, at worst, render North American automakers uncompetitive globally.
It would also mean — cue standing ovation from the climate activists — that North America, including Canada, would have access to the lower-cost electric vehicles needed to continue our transition to greener personal transportation. It would also offset the loss of the Inflation Reduction Act’s USD$7,500 EV consumer credit that Reuters just yesterday confirmed Trump’s transition team will trash after he takes power on January 20, 2025.
The sweet spot
Satisfying the need for cheaper cars by allowing Chinese automakers to assemble electric vehicles in America while at same time protecting the health of the domestic auto industry will require the finest threading of needles. After all, the threat of Chinese-built EVs undercutting locally produced equivalents by as much as USD$15,000 is, despite professed security concerns, the real reason tariffs were instituted in the first place. North American automakers, as we’re constantly reminded, simply would not be able to complete.
Enticing Chinese to build manufacturing plants in, as Trump’s suggested, “Michigan, Ohio, or South Carolina” would mitigate much of that advantage. While Chinese cars are indeed cheaper than our own, of that country’s current advantages — lower wages, less stringent environmental regulations, and superior manufacturing technology — only that last is likely to survive the transition to American soil.
Any Chinese transplant, for instance, would have to adhere to USMCA rules, which require a car’s key components — frames, engines, suspension bits, and batteries — contain a minimum of 75% local content. In other words, cells and batteries would have to be manufactured here in North America rather than imported from China.
That’s important because most, if not all, of China’s technological advantage is in its efficient production of batteries. CATL’s reported ability to build batteries for as little as USD$70 a kilowatt-hour may be only half of what it costs here in North America, but there’s little evidence that Chinese automakers can build the rest of their vehicles any more efficiently than we can. Factor in having to pay North American wages, the costs of meeting local environmental regulations, and other costs of doing business in the United States, and their price advantage might be as little as USD$2,500 (calculated by halving their USD$70/kWh advantage over a typical 70-kilowatt-hour battery).
In a perfect world, such an advantage might be sufficient to spur sales of electric vehicles without threatening domestic automakers. More importantly, competition with the Chinese would incentivize those same domestic automakers to increase their commitment to cheaper EVs, something tariffs most certainly will not do. Lastly, were a Chinese battery producer to build a plant in the continental U.S., they would almost assuredly insist that they be allowed to import — without tariffs! — the machinery that makes them so efficiently. And, if I am reading the trade tariff tea leaves correctly, Trump would make that contingent on Ford, General Motors, et al being able to purchase the same technology.
The risks in the gambit
Such a gambit is, of course, not without risk. First and foremost is the possibility that China’s price advantage would be larger than expected, rendering the very automakers Trump seeks to protect uncompetitive. Conversely, the Chinese might consider the rules too onerous — and their profit so marginal — that they decide the risk is too great. Building plants in America also doesn’t solve China’s core problem of having too much production capacity back home. Either way, though, getting the numbers right — i.e. controlling the cost advantages China might still enjoy — would be key for any bilateral agreement this contentious to work.
For us here in Canada, the results would be mixed. On the positive side, the tariffs would disappear, lending whatever sense of normalcy there remains in China-Canadian relations. On the other hand, there’s no way in Hell we’d get any of those new assembly facilities. China has but one master to placate, and it ain’t us. Besides, our federal government doesn’t have enough money to subsidize another battery transplant.
The Art of the Deal
Whether all this is doable — or, in Donald Trump’s estimation, desirable — is unknowable. A book by Robert Lighthizer, the president-elect’s chief trade negotiator between 2016 and 2020, provides perhaps the best clue into the machinations of a Trumpian trade deal. No Trade Is Free: Changing Course, Taking on China and Helping America’s Workers outlines the theory and minutiae of The Donald’s professed love of tariffs.
The upside is that Lighthizer, America’s toughest trade negotiator of the last 50 years, believes tariffs should be but temporary measures meant specifically to offset trade imbalances. The downside is that, while Lighthizer — and, by association, his former master, Trump — pays at least passing props to the rules of law, the most obvious lesson from No Trade Is Free is that, in international relations, leverage is not just everything, it’s the only thing. Anyone not yet understanding that all things are possible — as long as they favour the president-elect — would do well to slog through its 320 pages.
In other words, any deal with China could explode at the last minute and our (semi-)free trade deal with the U.S. — the United States-Mexico-Canada Agreement — is up for renegotiation in 2026. That could, if Trump gets tetchy about China, blow up in our faces too.
Author’s note: By the way, Churchill was even more like the Donald than one might think (you know, other than the towering intellect). Despite doing a great job — i.e. saving Europe — Churchill was kicked out of office not even three months after the Nazis surrendered. And, in yet another eerie parallel, he was also one of the few British prime ministers to serve non-consecutive terms, re-gaining power in 1951.
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