Ford has announced that its Focus Active crossover will not be released in the United States, the reason on offer being the costs of the tariffs imposed by President Trump. It’s possible to see this as a victory for those very tariffs – Americans won’t be buying China assembled cars after all. But to do so is to miss the very point of having an economy, that consumers get what they want.
The news itself means that likely to only Ford passenger car for the US will be the Mustang:
Ford Motor Co. announced on Friday that it will be canceling its plans to sell its new Chinese-built Focus Active in the U.S. next year, citing President Trump’s escalating trade war as the reasoning behind the move.
Kumar Galhotra, president of the car company’s North America division, said the president’s move to hit autos built in China with an additional 25 percent levy last month undermined the profitability of the new car, which the company had initially planned to ship into the country next year.
We might think that an answer is for Ford to build this car in the US but that’s never going to happen. They think they’ll sell 50,000 a year – that’s too small a number of a low priced and thus low margin car to be worthwhile. Just won’t achieve economies of scale. That’s why they are building it at just the plant in China and exporting to Europe. Manufacturing scale now is so important that just the one plant for the globe makes sense, multiple ones doesn’t:
After Ford Motor Company in May announced its plans to phase out nearly its entire car lineup in North America over the next several years, just two car models were said to have any sort of a future in the market: the Ford Mustang, and a crossover-inspired version of the Ford Focus named “Active”. But circumstances have changed, and US President Donald Trump has refused to deescalate the country’s trade war with China – the country where the North American-market Ford Focus Active was to be built.
Americans just aren’t going to get this car. They’re not even going to have the choice of it, something which makes Americans poorer, obviously. But there’s more to it than that:
This is likely the first of “many such announcements,” warned Kristin Dziczek, vice president of the Ann Arbor-based Center for Automotive Research. She predicts tariffs on Chinese imports, along with Trump’s additional threatened 25 percent tariff on cars and possibly parts from the European Union, would force several vehicles out of the American market.
“This is the first of potentially many vehicles that will disappear from the U.S. market,” she told The Detroit Free Press. “The threat or the imposition of a 20 to 25 percent tariff will limit consumer choices and raise prices in the U.S.”
The economics here – the lack of those economies of scale in solely the US market – mean that other models from other manufacturers will also be unavailable. That is, Trump’s tariffs do exactly what opponents of them say they will. As every economic textbook points out, consumers inside those barriers will have less choice and also pay more for what they can get. This makes them poorer. As trade “protection” always does, it makes consumers poorer. Which is why it, and tariffs, are a bad idea obviously enough. Making the citizenry poorer isn’t a known aim of any rational economic policy.