Trump's Anger With the 'Bad' Germans Will Hurt Americans
It turns out that Germany’s Der Spiegel magazine was a little off the mark last week when it reported that Donald Trump told European Union leaders in Brussels that “the Germans are bad, very bad.” What he actually meant by “very bad," according to his economic spokesman, is that millions of German cars are being sold in the United States and “we will stop this.” In other words, what the man who occupies the job traditionally referred to as “Leader of the Free World” objects to is the free flow of market goods.
Let’s get something straight right off the bat: If millions of Americans buy German cars, it is because millions of Americans happen to prefer a particular German car. They are voting with their pocketbooks. If, as the President has threatened, the United States imposed a 35 percent tariff (otherwise known as a tax,) the people who pay the price will be the American consumers who buy the German cars. As always, protectionism tries to punish foreign competitors by penalizing American consumers; in this case, cutting off the nose of American consumers to spite German manufacturers.
In fact, regardless of where you stand on free trade, it is hard to argue that German auto manufacturing is anything but good for the U.S. economy. Take BMW. The company’s largest plant in the world is located not in Munich or in Leipzig, but in Spartanburg, South Carolina. The $2.2 billion plant employs about 8,800 people in Spartanburg County, where it has spearheaded an economic revival and a renaissance in southern manufacturing since it was built in the early 1990s. Every year it produces over 400,000 vehicles, making it the highest-volume producer of all of BMW’s manufacturing facilities around the world. Moreover, about 70 percent of the vehicles the company makes at Spartanburg are exported outside the United States. In fact, if you want to know which facility in the United States – domestic or foreign owned – is the largest site producing exported goods by value, look no further than Spartanburg. In 2016, the BMW facility took top spot for the third consecutive year as the largest single exporter in the United States, exporting cars worth $9.5 billion. You want Americans to export more? BMW is leading the way.
BMW is not the only German automaker building cars in the United States for global markets. Daimler Mercedes-Benz, for example, builds high-value SUVs in Tuscaloosa, Alabama for export to Asia and Europe. Over the past seven years, German carmakers have quadrupled their annual production volume in the United States, with more than half the finished vehicles exported beyond America’s shores. Overall, German auto companies employ about 33,000 workers in the United States, and German automotive suppliers provide jobs for about 77,000 more. If the Administration were indeed to stop German automakers from selling into the U.S. market, it would also be stopping the creation of a lot of jobs and the exporting of a lot of American-made goods.
These figures, while impressive, speak only to one foreign country operating in the United States, in one industry. Overall, the U.S. economy is the largest recipient of foreign direct investment – and jobs – in the global economy. The jobs that foreign companies create in the United States, the goods they export, constitute one of the strongest arguments for trade.
In the 1930s, protectionist policies were characterized as beggar-thy-neighbor policies. But today, in a world of global supply chains and offshore production sourced worldwide, it is increasingly apparent that those who would pursue beggar-thy-neighbor policies would end up beggaring themselves. And those who would pursue tit-for-tat mercantilism end up taking at least one step back for every step they try to take forward. When one looks at it that way, it is clear that German auto companies operating in the United States are actually having a ‘very, very good’ impact on the U.S. economy.
