Trade war: Volvo boss warns Trump against 'going back to the 19th century'

Hakkan Samuelsson said it would be wrong for Volvo to keep its head down amid the global storm over trade whipped up by the Trump administration

'The whole growth in the economy in the last 100 years has been based on comparative advantage. If we stop doing that – that’s not smart.' (REUTERS)

The chief executive of Volvo Cars, Hakkan Samuelsson, has issued a powerful warning to the Trump administration not to impose tariffs on foreign car imports and insisted that a global company like the Chinese-Swedish car manufacturer has a responsibility to stand up for free trade.

Mr Samuelsson said Trump’s reported consideration of 25 per cent tariffs on foreign-made automobiles and car parts would only end up damaging the US economy.

“If we go back to the 19th century when everyone wanted to protect their own market that is definitely not good for the wealth of nations. That would really be bad – not just for Volvo,” he said.

“Cars would be more expensive. We’d probably sell fewer cars – and that would generate less growth in the economy. The whole growth in the economy in the last 100 years has been based on comparative advantage. If we stop doing that – that’s not smart.”

Mr Samuelsson was speaking at the official opening of a new Volvo car plant in Charleston, South Carolina, in which the company has invested an estimated $1.1bn.

The plant employs 900 workers, set to rise to 1,500 by the end of the year, and will produce the firm’s new S60, a medium-sized sports sedan. Half of the vehicles will be for the US market and half will be for export.

It is also earmarked to produce the next generation of Volvo’s XC90 SUV.

“This factory is a good example of free trade,” said Mr Samuelsson. “We want to build cars for America, but we also want to build cars for export. I think what we are demonstrating here is how we can prosper from free trade.”

Despite the plans to shift production to US soil, Volvo is intensely vulnerable to import tariffs. Volvo sold around 82,000 vehicles in the US in 2017, all of which were imported. Even when the South Carolina factory is fully operational it is estimated it will still only produce around 10 per cent of its total US sales.

Tariffs on automotive parts would also be extremely damaging, as the new South Carolina plant imports engines from Europe.

Mr Samuelsson said it would be wrong for Volvo to keep its head down amid the global storm over trade whipped up by the Trump administration.

“We need to engage ourselves politically. When you’re talking about politics that really influences our company and our customers and our shareholders….trade policies would really jeopardise our future growth,” he said.

“We need to take a stance on what’s happening in society. If you’re a global company you need to have an opinion.”

“We have not done that [invested in South Carolina] to be more listened to. But we are getting bigger and more global so hopefully our opinion matters more.”

He said that any tariff hit could lead to fewer Volvo jobs being created in the US than currently envisaged.

The inauguration of the new factory was attended by Nikki Haley, the former governor of South Carolina and now the Trump administration’s ambassador to the United Nations.

The Swedish ambassador to the US, Karin Olofsdotter, speaking at the inauguration, also warned about the Trump administration’s protectionism.

“We are a bit worried about trade agenda we see in the US,” she said.

“We are worried about steel an aluminium tariffs and extremely worried about the possibility of car tariffs – a plant like this does not need that. We are all part of global value chains and that is how the economy works,” she said.

The Gothenburg-headquarted Volvo was formerly owned by the US car manufacturing giant Ford. But after struggling severely in the global recession of 2008-09 it was sold to the Chinese Geely Group, controlled by the billionaire Li Shufu, in 2010.

With backing from Geely, Volvo has since invested heavily in new manufacturing plants in China

The decision to build a plant in South Carolina was first made by Volvo in 2015, before Donald Trump’s presidential campaign began.

Volvo sold a record 571,577 vehicles globally in 2017 and earned a $1.2bn operating profit.

US sales were up 40 per cent on a year earlier over the first five months of 2018.