Aug. 5—ACME — Automakers and their suppliers are keen to understand the changing relationship between China and the U.S. The global trade situation was the focus of a session during this week's Center for Automotive Research Management Briefing Seminars at Grand Traverse Resort and Spa.

"I think China is smack dab in the middle of our trade discussion," said Kristin Dziczek, senior vice president of research for the Center for Automotive Research.

The situation is far from rosy.

Michael Dunne, CEO of ZoZo Go, a car industry adviser company that specializes in Asian markets, quoted former U.S. Secretary of State Henry Kissinger as saying in 2019 that the U.S. and China were in the foothills of a cold war.

This year, Dunne attended a trade conference where Kissinger said the United States and China are no longer in the foothills a cold war. "We've actually moved up to the mountain passes," he quoted Kissinger as saying.

"The trend is not our friend," said Dunne. "Things are getting more and more tense and acrimonious between China and the United States."

That's bad news for everyone in the mobility industry.

Automakers, in their quest to control prices, in the last couple of decades moved a considerable portion of their supply sources to China. The COVID-19 pandemic revealed some of the dangers of long, relatively fragile supply chains. The rising political tension now is causing automakers to rethink that strategy and consider moving at least some of those far-flung supply sources back to North America.

But overseas supplies for some components will remain important for automakers.

"We are a global industry. We don't need to make everything in the U.S.," said Ann Wilson, senior vice president for government affairs at the Motor and Equipment Manufacturers Association. "Buyers are not going to pay more for a car with a wiring harness made here" instead of in China.

But, she said, U.S. automakers should strive to produce key components, like batteries and semiconductors, in North America to avoid future supply problems.

Dunne said more than 90 percent of batteries in electric vehicles currently are produced in North Asia: Japan, Korea and China. Panasonic, he said, has a joint-venture battery manufacturing facility in Nevada, and other U.S. battery factories are being planned. But the U.S. lags far behind Asia in battery production.

"It's really lop-sided in terms of distribution of manufacturing," he said. "We need to have manufacturing more balanced globally, including in the United States."

MEMA's Wilson agreed.

"We need to make the most important things here," she said.

High-ticket products tend to require the most highly skilled workers. Bringing production of those essential components to the U.S. could help American workers. It also might tend to increase automakers' costs, since workers in China tend to be paid lower wages than those in the U.S.

"We can't have all prices premised on low wages and low compensation," said Brad Markell, executive director of the AFL-CIO's Industrial Union Council.

The reality of the modern global mobility industry is that successful companies thrive when they build cars in multiple nations.

Ford has built cars in Europe for decades. Toyota and Volvo build cars in the U.S. Assembling cars in the nation in which they will be sold is a time-tested strategy to avoid tariffs.

"Tariffs have been a useful economic tool since the time of Alexander Hamilton," said Markell, and they remain a viable tool for governments to help their companies and workers.

Tariffs also may be part of how the auto industry brings more EV battery production to North America.

"In the short term, I can see tariffs as an incentive for foreign investment in the United States to give us some breathing room so we can ramp up," said Dunne. "And then eventually, as we become more competitive, tariffs can come down."

"Right now, if we say 'no tariffs, import from Asia, from China' — 75 percent of mega battery factories globally now are situated in China — China would just roll across the world with its battery exports and control the strategic industry in the future. That's not OK."