OPINION:
American CEOs who succumb to the lure of China’s sweatshops, pollution havens and government subsidies inevitably lose not just their souls. They eventually surrender their companies.
Apple CEO Tim Cook and Tesla chief executive Elon Musk are just the latest in a long line of dupes now learning this harsh lesson — a lesson they should have learned long ago from former General Electric CEO Jeff Immelt.
In 2001, China joined the World Trade Organization and immediately began to bludgeon blue-collar America with its weapons of job destruction — theft of intellectual property, currency manipulation, massive government subsidies, state-owned enterprises, etc. Mr. Immelt took over the reins of GE that same year from the venerable Jack Welch and soon began offshoring GE production.
It was a big bet many American CEOs were making on China along with Mr. Immelt. But it was truly a sucker’s bet bound to go bust.
As a matter of mercantilist government policy — it’s all there in state documents for any CEO to read — China uses its honey pot of cheap labor, lax environmental regulations, and massive land, energy and other government subsidies to lure foreign capital and companies. China’s quid pro quo, quite against WTO rules, is the forced transfer of an American company’s technology to nascent Chinese competitors in exchange for access to Chinese markets.
Implicit in the bargain is this paradigm of assumed inevitability: Once a Chinese competitor is sufficiently endowed with American technology, it will not only compete against that American company in Chinese markets. It will also challenge American companies in lucrative markets around the world.
Nor will this inevitable clash be fair. China uses any means necessary to give its national champions a leg up on — and often a kick to the groin to — any American competitor foolish or greedy enough to produce on motherland soil.
Like GE before it, Apple and Tesla now have this grim mercantilist reality. Because Mr. Cook and Mr. Musk each directed the offshoring of the vast bulk of Apple’s and Tesla’s production to China, the companies are at the mercy of a merciless dictator in Xi Jinping.
Indeed, China’s national champion, Huawei, is pummeling Apple. To assist Huawei’s frontal and all-flank assault, China has banned its government officials from using iPhones. Mr. Xi’s autocrats are also aggressively leveraging Chinese nationalism to encourage its citizens to “Buy China” and shun foreign devil products like iPhones.
Not surprisingly, Apple is now looking at a double-digit loss of Chinese market share in 2024. Of course, it’s a zero-sum game, as Apple’s losses will be gains for Huawei and even smaller fish like Xiaomi.
Tesla faces its own eventual destruction with the sudden emergence of BYD. This is a formidable Chinese national champion weaned on China’s massive subsidies and its blatant theft of Tesla technologies and styles. BYD recently stunned the world by vaulting over Tesla to the top of electric vehicle production not just in China, but worldwide.
Mr. Musk’s Teslas are also undergoing a similar kind of xenophobic Chinese ban. Teslas are prohibited from entering Chinese military complexes or housing compounds on the flimsy grounds the cars will be used to spy on China.
Arrogance and hubris are common threads that run from Mr. Immelt in the 2000s through Mr. Cook and Mr. Musk today. These master-of-the-universe Americans always assume they can outwit China’s gypsies, tramps and IP thieves.
In 2011, Mr. Musk, for example, laughed off BYD — but he isn’t laughing now. Neither is Mr. Cook. Meanwhile, the ghost of the great Jack Welch spins in his grave every time he thinks about how Mr. Immelt destroyed both Welch’s legacy and the beautiful GE that Welch built.
During my years in the West Wing, I watched Apple’s Tim Cook, in particular, try to subtly lobby my old boss, often through President Donald Trump’s son-in-law Jared Kushner, for relief from tariffs. Mr. Cook inevitably argued that Apple was “too big in China to tariff” and that the tariffs therefore brought the company great harm.
To Mr. Cook today, I would say, you should have been far more careful of what you asked of us. If you had done what Mr. Trump, then-U.S. Trade Representative Bob Lighthizer and I wanted, you would have steadily reduced your China exposure instead of doubling down to the point of putting your company at grave risk.
To protect his electric vehicle factory in Shanghai, the world’s largest, Mr. Musk has been a loud, kowtowing bull in the pro-China lobbying shop. Mr. Musk openly praises the butchers of Beijing — their persecution of Uyghurs, Christians and political dissidents be damned.
Mr. Musk has also called for the subjugation of the vibrant democracy of Taiwan even as he uses his vast fortune and his social media platform, X, to thwart Xi Jinping’s nemesis Donald Trump in 2024. It remains an open question as to how one of the smartest and richest men on the planet can continue to be so stupid and devoid of ethical fiber.
Whether you are a big hedge fund manager or a small retail investor, you have to wonder whether Apple or Tesla are still safe investments — at least on the long side, if you get my drift.
If you are a red-blooded American, you also have to wonder whether it is long past time for the U.S. government to stop the flow of American capital and the offshoring of America’s factories to China. Clearly, American CEOs and Wall Street won’t do it on their own.
• Peter Navarro served for four years in the Trump White House as manufacturing czar and chief China strategist. This column originally appeared at www.peternavarro.substack.com.
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