If it pays to have pals in excessive locations, few amongst us can declare to be higher positioned than Elon Musk, the world’s richest man and one of many solely individuals to have cosy relationships with each Donald Trump and Xi Jinping. His industrial and political connections to each might show pivotal because the feud between the US and China performs out over the following 4 years, significantly as Trump guarantees steep tariffs.
Musk, the billionaire CEO of Tesla and SpaceX, as soon as supported Joe Biden. However his relationship with the present US president soured over the previous 4 years as, amongst different insults, Musk felt that the White Home gave Telsa, his automobile and inexperienced power firm, “the chilly shoulder”. Trump, in the meantime, has described Tesla as “unimaginable” even whereas pledging to eliminate subsidies for electrical autos. This yr, Musk formally endorsed Trump because the presidential candidate, campaigned for him on-line and off and donated greater than $100m to his re-election effort.
Musk’s loyalty has been rewarded along with his appointment because the chief of a newly created Division of Authorities Effectivity (Doge), which, regardless of its identify, shall be an advisory physique, not a authorities company. However maybe extra necessary for the worldwide financial system than his official position would be the affect he has on the dynamic between the leaders of the world’s two superpowers. With a commerce warfare that was began by Trump and expanded by Biden, and mounting geopolitical tensions, the US-China relationship has been tumbling downhill for years, with unfavorable international penalties, not least for customers within the US and China, who’ve seen costs rise in consequence.
In contrast to the opposite figures in Trump’s newly appointed cupboard, similar to China hawk Senator Marco Rubio, Trump’s decide for secretary of state who has been hit with sanctions by Beijing, Musk has a comfortable relationship with China’s high leaders.
Musk has visited China a number of instances, most not too long ago in April, when he made a shock journey to Beijing to convene with the Chinese language premier Li Qiang. Final yr, he met the Chinese language president, Xi Jinping, in San Francisco.
Musk’s relationship with Li, the second-highest rating individual in China, is very shut: Li was the celebration secretary for Shanghai in 2019, when Tesla opened its first abroad manufacturing facility there, which is now Tesla’s largest manufacturing facility by output. It was constructed with loans of $521m from Chinese language-state owned banks, which had been issued at beneficial rates of interest. The Shanghai authorities gave Tesla a useful company tax charge of 15% between 2019 and 2023, decrease than the usual 25%. Tesla additionally reportedly managed to develop into the primary overseas auto firm to be allowed to arrange and not using a native companion.
And development has now began on a second $200m Tesla manufacturing facility in Shanghai, which is predicted to provide round 10,000 utility-scale lithium-ion batteries, known as Megapacks, per yr. Lithium batteries are certainly one of China’s “new three” precedence industries as Xi tries to pivot the financial system in the direction of high-tech, renewable infrastructure. The opposite two precedence areas – EVs and photo voltaic panels – are additionally each Tesla merchandise, although to a lesser extent concerning photo voltaic panels.
With massive investments in two out of three of China’s financial priorities, Musk has been welcomed to the nation with open arms. Reporting on the brand new battery manufacturing facility in Shanghai, Chinese language state media stated: “Regardless of the US intensifying its crackdown on China’s new power car (NEV) sector, Tesla has chosen to additional put money into China. This highlights business leaders’ sturdy confidence in China’s high-tech development”.
Musk is vocal about his assist for the nation – and its authorities – that many in Washington see because the US’s largest menace. He has described China as “really superb” and tweeted his gratitude to the Chinese language authorities for supporting Tesla’s enterprise in China. The nation accounts for round one-quarter of Tesla’s international revenues, and the lion’s share of car manufacturing capability. The Shanghai manufacturing facility has the capability to make greater than 950,000 automobiles a yr, in contrast with greater than 650,000 from the California plant.
Leaders in China might due to this fact need to leverage their assist for Tesla into concessions from the brand new Trump administration, by way of Musk.
Trump has promised to introduce 60% tariffs on all Chinese language imports, eliciting ire from Beijing and exacerbating an already fractious relationship. Levies on Chinese language electrical autos are already 100%, one thing which Musk has criticised, whereas on the similar time warning that Tesla shall be “demolished” if not financially protected against the likes of BYD.
Trump has pledged that US tariffs on Chinese language EVs will to guard US carmakers. However the built-in nature of the EV provide chain, and China’s superior place on the subject of battery applied sciences and the uncooked supplies wanted for EVs, implies that few firms, together with Tesla, can remove the necessity for Chinese language elements of their merchandise. For instance, in October, following the newest spherical of US tariffs, which elevated the levy on Chinese language lithium-ion EV batteries from 7.5% to 25%, Tesla’s Mannequin 3 automobile grew to become unavailable for gross sales within the US. The automobile makes use of batteries made by the Chinese language firm CATL.
Daniel Ives, the worldwide head of expertise analysis at Wedbush Securities, a monetary companies agency, predicts that Musk will use his “bromance” with Trump to barter useful phrases for Tesla and its pursuits in China, similar to a exemptions for Tesla and different EV firms on batteries. These negotiations might prolong so far as tempering Trump’s commerce warfare with China. “To have [Musk] there, it offsets slightly of the hawkishness from Rubio and others,” Ives stated.
“I feel there are going to be carve-outs for Tesla on the subject of tariffs, as effectively for China,” Ives stated. “That’s why Musk being a giant a part of the Trump presidency is so necessary”.
Further analysis by Jasper Jolly
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