Volvo has announced that it will build a factory in South Carolina where it will employ 4,000 workers to produce a small sedan to be sold in China and Europe as of 2018. Volvo, which was founded in Sweden, is currently owned by the Chinese Geely investment and manufacturing group. Volvo remains headquartered in Stockholm.
In an interview with the Financial Times, Volvo chief executive Hakan Samuelsson said that producing cars in the United States for export, especially to China, rebuts arguments that China is stealing Americans’ jobs. “From an American horizon, we see that we create 4,000 jobs in South Carolina. Half of those jobs will be related to export to Europe and China,” said Samuelsson. Saying that Volvo’s trade flow is fair and balanced, Samuelsson vowed that the move is “good for everybody.”
Volvo, under Geely, produces S90 Volvo sedans in China for export to the US. Producing vehicles in the US will allow Volvo to forestall the effects of steep tariffs proposed by the Trump administration on foreign-made cars. In response to American industrialists who have sought reciprocity with China, some Congressional Republicans have proposed a so-called “border adjustment tax” to reduce America’s trade deficit by allowing companies to deduct exports, but not imports, from taxable profits.
China’s regulations require that foreign companies must produce in China with joint venture partners, or else face 25 per cent tariffs. Meanwhile, the United States imposes a 2.5 percent tariff on imported autos and does not restrict foreign companies’ investment. According to analysts, because Geely seeks to increase exports the company will have to consider keeping local markets open. Samuelsson of Volvo is seeking a “balanced approach” of selling vehicles made in China to the US, and vehicles made in the US to China. “This [the South Carolina plant] is very powerful argument in any discussion about border adjustment tax...It’s about free trade and the benefits of free trade,” Samuelsson said.