Will You Be Ready When the President’s Words Move Your Market?

Communicators are more aware than most that words matter. Words can move markets. There are few better examples of this than several small statements made May 23.

President Trump said the U.S. automobile industry’s health is a national security concern: “Core industries such as automobiles and automotive parts are critical to our strength as a nation,” he said, echoing a theme heard during his election campaign.

A few hours later the Commerce Department followed the president’s statement with its own. Commerce said it would launch a national security probe under Section 232 of the Trade Expansion Act of 1962 to investigate whether or not imported vehicles and parts threaten the U.S. auto industry’s health and ability to research and develop technologies.

Donald Trump finger pointshutterstock_518271628 (1)Earlier in the day Commerce also said what many who follow the automobile industry already know: Imports of passenger vehicles into the U.S. make up about half the cars sold in this country. “There is evidence suggesting that…imports…have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said, making it sound as if the report's conclusion already was written. The kicker is should Commerce’s report conform to Secretary Ross' words, the president could slap significant tariffs of 25% on imported cars and components, making them far more expensive.

A similar report resulted in U.S. tariffs on steel and aluminum imports in March.

An investigation of the auto industry could take months—insuring weeks of uncertainty for workers in the U.S. and abroad employed at auto companies.

It’s a rule of economics that markets abhor uncertainty. True to form, shares of many automakers, such as Toyota and Honda, fell in trading today (May 24).

Nearly all passenger cars imported into the U.S. last year came from Mexico, Canada, the European Union, Japan and South Korea.

What Should Communicators Say?

The question for communicators at foreign auto brands, or any company aligned with them, such as suppliers, is what should they be telling their stakeholders about the future?

Perhaps the wisest course is to say nothing at this early stage. In PR parlance, monitor the conversation and gather facts before reacting. But for how long? This is what makes PR a mix of art and science.

Since politics and complications around the auto industry are many, it's far from a foregone conclusion that tariffs are coming. One complexity is so-called transplants—cars assembled in the U.S. for foreign brands using both imported parts and parts made in this country. It's unclear whether they would they be subject to tariffs.

Japan said it would monitor the situation. It is believed President Trump enjoys warm relations with Japan’s leader Shinzō Abe. Perhaps a deal could be forged to shield Japanese imports from heavy tariffs, particularly if it could be shown a significant number of the cars are transplants.

South Korea also said it will monitor developments, as did Toyota of Japan.

Eyeing the U.S. market for its cars, China had a more belligerent statement, calling the investigation an “abuse of national security clauses.” The Chinese equation also is complicated because it manufactures parts in China used in the assembly of cars in the U.S.

A Statement Assumes Tariffs

This morning (May 24), Here for America, an industry group representing automakers from Japan, Germany and others, slammed the idea of tariffs. “Contrary to the assumption underlying the investigation on import vehicles, the U.S. auto industry is thriving,” its CEO John Bozella said, adding “to our knowledge no [U.S. automaker]…is asking for [tariffs]” to protect them.

He added, “If these tariffs are imposed, consumers are going to take a big hit because they will have fewer vehicle choices and higher car and truck prices.  This course of action will undermine the health and competitiveness of the U.S. auto industry and invite retaliation by our trading partners.”

We contacted more than one dozen agencies and automotive brands for comment; none did.

Of course silence might be the best route for a communicator should she/he believe the president’s statement is little more than bold rhetoric from a man elected to shake up Washington and ensure America comes first.

In addition, presidential talk of tariffs could be saber rattling as the U.S. renegotiates the North American Free Trade Agreement (NAFTA). Mexico and Canada are two of the largest importers of cars to the U.S. and a tariff on autos could jump-start negotiations with those countries. A presidential aide essentially said the threat of a tariff was being used to compel Mexico and Canada to negotiate NAFTA more honestly.

Recall, too, before and after the 2016 U.S. election brands were concerned about how to react  to attacks via Twitter.  Skittles was drawn into a controversy before the election and acquitted itself well. Starbucks, promoting unity, was semi-roasted. In short, the advice to brands and communicators then was to proceed cautiously, but if your values are attacked you should respond. To remain silent would seem inauthentic.

The old PR playbook taught brands to stay out of politics. Today, though, brands are supposed to represent more than profits—they need to stand for something. And they are prone to presidential criticism or worse.

Even in the highly uncertain situation surrounding automobiles, one thing seems fairly clear: Communicators will be asked to explain positions on all sides of this issue.

Seth Arenstein is editor of PR News. Follow him: @skarenstein