The Ford F-150 is the best selling truck in America, and the one that uses the most American parts. But key components are made in other countries, a fact that could send prices higher due to President Trump’s trade policies. (PHOTO: Tuner Tom, Flickr CC).
Understanding trade policy can be overwhelming. Tariffs. Trade deficits. NAFTA. Currency wars. But pickup trucks offer explicit clarity on how trade policy hits people where they live.
Take the popular Ford F-150. It’s the top selling truck in America. You can find a F-150 in almost any parking lot on Minnesota’s Iron Range. This is especially true in the employee lots at any of our iron ore mines. There workers extract the dark gray manna that eventually becomes even more F-150s.
And to avoid controversy, yes, this is true of Chevy and Dodge trucks, too, to varying extents. Even some foreign brands made in the United States include American steel or other American-made components. This is where we start to see problems with a simplistic view of trade policy.
See, when I grew up on the Mesabi Range, we broadly understood that American vehicles were made in Detroit. Japanese vehicles came from Tokyo. German vehicles came from Berlin (not that anyone I knew could afford them).
Steelworkers like my grandfather would tell me that buying an American car meant that union workers in America would have good jobs like the one he had. This was clear. Even as a child, I understood it. My family would only drive American cars.
My 13-year-old son wants a Ford F-150 because *his* grandpa drives one. And so it goes.
But an Aug. 25 story in the Economist challenges those old assumptions. The Ford F-150 is indeed the most American of trucks on the market. It’s also the cash cow of the Ford product line, netting up to $13,000 in profit per truck. But Ford imports a critical 10 percent of its components from Canada and other places. A trade war with Canada and China would force Ford to make or buy these components at significant cost, increasing the price and hurting sales.
Nevertheless, the F-150 would weather the storm better than most. The industry average for “American-made” vehicles is about 50 percent American components and 50 percent imported. Some “foreign” brands are indeed more American-made than certain domestic automakers. Meantime, most automakers employ a supply chain that includes Canada, Mexico and the United States, feeding the same cars to all three countries.
If NAFTA falls apart entirely, and it may, we would watch these companies struggle to build redundant plants in all three countries, raising prices across the board. Yes, you might say that this could lead to more American jobs, but not if fewer cars and trucks are sold.
Meantime, China — the country most responsible for trade disruption in American steel — is modestly concerned but largely immune from this problem. They don’t make cars for American buyers, nor do they import American cars. We’re fighting with Canada for no reason, while China simply swoops in to make cars for foreign markets that can no longer afford our more expensive products.
We are tempted to embrace the idea of an America closed off from the rest of the world, making products only for itself. It’s a simple notion that sound good. But in reality, the resulting higher prices would rock our economy. Corporate America has kept most incomes too low for us to endure the shock. Some might afford $70,000 pickups, but most wouldn’t. Not without higher incomes.
In reality a wealthy minority would glide their new cars and trucks on private boulevards, while the rest of us rattle along decaying roads in buses and used cars.
That’s not to say globalization is good for everyone. It obviously isn’t. The lack of protection for these workers amid the rise of these global markets represents the great failure of the previous generation. But global trade is now so ingrained in our economic system that we should strive for balance.
After all, the genius of Henry Ford’s business model was that his products would be affordable to the workers who made them. In this, a steady economic system protected workers by making them full participants in the economy.
The short term effects of the president’s trade policies have clearly benefited some American corporations. But if that brings about an economic recession that hits workers hardest, the price will have been too high.
Workers only mine the iron ore that makes Ford F-150s if they — and countless others who are paid even less — can afford the trucks to begin with.
Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog MinnesotaBrown.com and hosts the Great Northern Radio Show on Northern Community Radio. This piece first appeared in the Sunday, Sept. 16, 2018 edition of the Hibbing Daily Tribune.
A lot of that “steel” in an F150 is now aluminum. The aluminum bodies displace about 1500 lbs per truck of what was once steel derived directly from pellets, enough in total to keep a small plant like Minoorca going.
Bad example.