Trump Takes the Bait From Musk, Attacks China Auto Import Duties

(Bloomberg) -- President Donald Trump may not follow Elon Musk on Twitter, but the Tesla Inc. chief’s posts decrying China’s automotive trade practices managed to catch his attention.

In announcing his order to implement tariffs on steel and aluminum Thursday, Trump read off tweets Musk sent hours earlier noting that China charges a 25 percent import duty on cars, ten times the 2.5 percent levy the U.S. puts on China-built vehicles.

“That’s from Elon, but everybody knows it,” Trump said. “They’ve known if for years, they never did anything about it. It’s got to change.”

Musk’s lobbying-by-tweet hinted at his frustration over struggling to get a deal done with Shanghai’s government to assemble cars there. An agreement hasn’t been finalized because the two sides disagree on the ownership structure for a proposed factory, people with direct knowledge of the situation have told Bloomberg News. China’s central government is pushing for the plant to be a joint venture with local partners, while Tesla wants to own the factory completely, the people said.

“Do you think the US & China should have equal & fair rules for cars?” Musk wrote to Trump. “I am against import duties in general, but the current rules make things very difficult,” he said in another post. “It’s like competing in an Olympic race wearing lead shoes.”

Import duties and the difficulties Tesla has had avoiding them by trying to produce in China has held the company back in the world’s biggest market for cleaner cars. Sales of battery-electric, plug-in hybrid and fuel cell-powered autos could surpass 1 million units this year, according to the China Association of Automobile Manufacturers.

China requires overseas automakers to form joint ventures with local manufacturers in which the foreign companies are capped at 50 percent ownership. The government’s aim when introducing the policy in the 1990s was for its then-fledgling auto industry to benefit from technology transfer by operating along with global giants including Volkswagen AG and General Motors Co.

The National Development and Reform Commission said in June 2016 that China was looking into lifting the 50 percent ownership cap. The U.S. Chamber of Commerce has criticized the policy for limiting market access, but supporters of the rule say it gives China’s automakers a better shot at developing technology that can be competitive on the global stage.

“We raised this with the prior administration and nothing happened,” Musk wrote after tweeting at Trump about both the import duties and joint-venture ownership rules. “Just want a fair outcome, ideally where tariffs/rules are equally moderate. Nothing more. Hope this does not seem unreasonable.”

Trump and Musk have a rocky history. The Tesla chief executive officer served on two White House advisory councils before stepping down in June after the president announced he would pull the U.S. out of the Paris climate accord. The frosty relationship seemed to thaw last month, when Trump tweeted his congratulations to Musk following a successful launch by Space Exploration Technologies Corp., another one of the billionaire’s companies.

The president praised SpaceX again Thursday morning. He gushed about its launch of the Falcon Heavy, the world’s most powerful rocket in 45 years. After rumbling into the sky, two of the rocket boosters landed back on the Florida coast.

“I don’t know if you saw last -- with Elon -- with the rocket boosters where they’re coming back down,” Trump told reporters. “To me, that was more amazing than watching the rocket go up, because I’ve never seen that before. Nobody’s seen that before, where they’re saving the boosters, and they came back without wings, without anything. They landed so beautifully.”

During the press conference discussing his steel and aluminum tariffs, Trump used Musk’s example of China’s car-import levies to reiterate his plans for what he’s called a “reciprocal tax.”

“If China’s going to charge us 25 percent or if India’s going to charge us 75 percent,” the U.S. will levy “those same numbers,” Trump said.

--With assistance from Brandon Kochkodin and Taka Endo (Bloomberg Global Data).

To contact the reporters on this story: Dana Hull in San Francisco at dhull12@bloomberg.net, Justin Sink in Washington at jsink1@bloomberg.net.

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Anne Riley Moffat

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