POLITICO — 2024-11-20
Automotive Industry
Elon Musk needs good relations with China to keep pumping cash into Tesla, while Donald Trump wants to hit Beijing with tariffs.
The reelection of Donald Trump is threatening to tip US-China relations into a downward spiral of trade tariffs and escalating international spats, with Europe stuck in the middle.
But China thinks it has an ace in its back pocket that could help keep Trump’s more robust policies in check: Tesla CEO Elon Musk, whose company depends on good ties with the Asian country.
“Tesla cannot exist without China,” said Cornel Ban, an associate professor at the Copenhagen Business School, who studies electric vehicle investments in China.
That reality makes Musk’s efforts to balance his ties with the tariff-loving Trump and with Chinese officials crucial — both to his company and to the broader relationship between Washington and Beijing.
“There won’t be a big conflict between the US and China so long as Musk is in the White House,” Ban said.
Musk isn’t the only one who has Trump’s ear, though.
So far, the president-elect has stacked his new administration with China hawks such as Marco Rubio, his pick for secretary of state, and Mike Waltz as national security adviser.
Musk bet big on China, and it’s paying off for him. Tesla’s first Shanghai factory launched in December 2019 and now produces half of the firm’s global supply, with many cars going to Europe. A second factory is under construction.
Tesla was the first foreign company to open a wholly owned and operated factory in China, a break with the pattern followed by other carmakers, which have been allowed to operate in China as long as they set up joint ventures with local companies.
Beijing is keen to underline its unique relationship with Tesla.
A Saturday op-ed in People’s Daily, an influential state newspaper, underlined the benefits of what it called “win-win cooperation.” Author Hua Ping — likely a pseudonym, as the name means “China Comment” — wrote: “Relying on the advantages of technology and brand, backed by China’s super-large-scale consumer market, Tesla’s sales have increased significantly.”
The author then noted that over one-third of the Teslas produced in Shanghai will be exported.
Those business interests are going up against Trump’s calls to hit all imports with tariffs.
Robert Lighthizer, Trump’s trade chief during his first administration, has been circulating plans on how to enact the dramatically higher tariffs Trump promised on the campaign trail.
On Tuesday, 20 November 2024, Trump chose Howard Lutnick, a longtime friend and chief executive of financial services firm Cantor Fitzgerald, as his nominee for commerce secretary. Lutnick has championed Trump’s plans to use tariffs on foreign imports to boost the US economy.
That puts Trump’s electoral “America first” message on a collision course with Musk’s interests. At the moment, the billionaire is a constant presence at Trump’s side, but the president burned through advisers and cabinet officials like hot cakes during his first tenure, and there are already reports that he is wearying of Musk.
“If [Musk] is already taking a public stance on nominations when he probably shouldn’t ... it means that he doesn’t think of himself as an adviser but as a co-equal,” said François Godement, a resident fellow on the US and Asia at France’s Institut Montaigne.
“I have my doubts that this can endure for long.”