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Ready or Not, Indian Businesses Brace for Biggest-ever Tax Reform

Businessman Pankaj Jain is so worried about the impending launch of a new sales tax in India that he is thinking of shutting down his tiny textile factory for a month to give himself time to adjust.

Jain is one of millions of small business owners who face wrenching change from India’s biggest tax reform since independence that will unify the country’s $2 trillion economy and 1.3 billion people into a common market.

But he is simply not ready for a regime that from July 1 will for the first time tax the bed linen his 10 workers make, and require him to file his taxes every month online.

On the desk in his tiny office in Meerut, two hours drive northeast of New Delhi, lay two calculators. Turning to open a metal cabinet, he pulled out a hand-written ledger to show how he keeps his books.

“We will have to hire an accountant – and get a computer,” the thickset 52-year-old told Reuters, as a dozen ancient power looms clattered away in the ramshackle workshop next door. Prime Minister Narendra Modi’s government says that by replacing several federal and state taxes, the new Goods and Services Tax (GST) will make life simpler for business.

To drive home the point, Bollywood superstar Amitabh Bachchan has appeared in a promotional video in which he weaves a cat’s cradle between the fingers of his hands – symbolizing

India’s thicket of old taxes. With a flourish, the tangle is gone and Bachchan proclaims: “One nation, one tax, one market!”

Not so simple

By tearing down barriers between India’s 29 states, the GST should deliver efficiency gains to larger businesses. HSBC estimates the reform could add 0.4 percent to economic growth.

Yet at the local chapter of the Indian Industries Association, which groups 6,500 smaller enterprises nationwide, the talk is about how to cope in the aftermath of the GST rollout.

“In the initial months, there may be utter confusion,” said chairman Ashok Malhotra, who runs one firm that manufactures voltage stabilizers and a second that makes timing equipment for boxing contests.

A big concern is the Indian GST’s sheer complexity – with rates of 5, 12, 18 and 28 percent, and myriad exceptions, it contrasts with simpler, flatter and broader sales taxes in other countries.

The official schedule of GST rates runs to 213 pages and has undergone repeated last-minute changes.

“Rubber goods are taxed at 12 percent; sporting goods at 18 percent. I make rubber sporting goods — so what tax am I supposed to pay?” asks Anurag Agarwal, the local IIA secretary.

Grace period?

The top government official responsible for coordinating the GST rollout rebuts complaints from bosses that the tax is too complex, adding that the IT back-end that will drive it – crunching up to 5 billion invoices a month – is robust.

“It is a technological marvel, as well as a fiscal marvel,” Revenue Secretary Hasmukh Adhia told Reuters in an interview.

The government will, however, allow firms to file simplified returns for July and August. From September they must file a total of 37 online returns annually – three each month and one at the year’s end – for each state they operate in.

One particular concern is how a new feature of the GST, the input tax credit, will work. This allows a company to claim refunds on its inputs and means it should only pay tax on the value it adds.

The structure will encourage companies to buy from suppliers that are GST-compliant, so that tax credits can flow down a supply chain.

That spells bad news for small firms hesitating to shift into the formal economy. The government estimates smaller companies account for 45 percent of manufacturing and employ more than 117 million people.

Adhia played down the risk of job losses, however, saying this would be offset by new service sector jobs.

Demonetization 2.0

The prospect of disruption is drawing comparisons with Modi’s decision last November to scrap high-value bank notes that made up 86 percent of the cash in circulation, in a bid to purge illicit “black money” from the system.

The note ban caused severe disruption to India’s cash-driven economy and slammed the brakes on growth, which slowed to a two-year low in the quarter to March.

“It could throw the business out of gear – it can affect your volumes by at least 30 percent,” said the head of one large cement company in the Delhi region.

Back in Meerut, Pankaj Jain worries that hiring an accountant and charging 5 percent GST on his bedsheets could eat up to two-thirds of his annual profits of 400,000-500,000 rupees ($6,210-$7,760).

“I know my costs will go up, but I don’t know about my income,” he said. “I might even have to shut up shop completely and go into trading.”

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EU Hits Google With $2.7B Fine for Abusing Weaker Rivals

European regulators fined Google a record 2.42 billion euros ($2.72 billion) for abusing its dominance of the online search market in a case that could be just the opening salvo in Europe’s attempt to curb the company’s clout on that continent.

The decision announced Tuesday by the European Commission punished Google for unfairly favoring its own online shopping recommendations in its search results. The commission is also conducting at least two other probes into the company’s business practices that could force Google to make even more changes in the way it bundles services on mobile devices and sells digital advertising.

Even so, Europe’s crackdown is unlikely to affect Google’s products in the U.S. or elsewhere. But it could provide an opportunity to contrast how consumers fare when the company operates under constraints compared with an unfettered Google.

The fine immediately triggered debate about whether European regulators were taking prudent steps to preserve competition or overstepping their bounds to save companies being shunned by consumers who have overwhelmingly embraced an alternative.

Margrethe Vestager, Europe’s top antitrust regulator, said her agency’s nearly seven-year investigation left no doubt something had to be done to rein in Google.

“What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation,” Vestager told reporters Tuesday.

The fine was the highest ever imposed in Europe for anti-competitive behavior, exceeding a 1.06 billion euros penalty on Silicon Valley chip maker Intel in 2009.

The penalty itself is unlikely to leave a dent in Google’s finances. Parent company Alphabet Inc. has more than $92 billion (82 billion euros) in cash, including nearly $56 billion (50 billion euros) in accounts outside of the U.S.

The findings in Europe contrasted sharply with those reached by the U.S. Federal Trade Commission in a similar investigation of Google completed in 2013. The FTC absolved Google of any serious wrongdoing after concluding that its search recommendations did not undermine competition or hurt consumers.

Leading up to that unanimous decision, though, some of the FTC’s staff sent a memo to the agency’s commissioners recommending legal action because Google’s “conduct has resulted – and will result – in real harm to consumers and to innovation in the online search and advertising markets,” according to a memo inadvertently released to The Wall Street Journal two years ago.

Google’s misbehavior in Europe boiled down to its practice of highlighting its own online shopping service above those of its rivals. Merchants pay Google for the right to show summaries of their products in small boxes displayed near the top of search results when someone seems to be interested in a purchase.

Meanwhile, Google lists search results of its biggest rivals in online shopping on page 4 – and smaller rivals even lower, based on the calculations of European regulators. That’s a huge advantage for Google when 90 percent of user clicks are on the first page.

Google says consumers like its shopping thumbnails because they are concise and convenient.

The commission’s decision “underestimates the value of those kinds of fast and easy connections,” Kent Walker, Google’s general counsel, wrote in a blog post.

Europe’s investigation did not present any concrete evidence that consumers had been financially damaged by Google’s online shopping tactics, said Ibanez Colomo, a law professor at the London School of Economics.

“The only harm being alleged here is that competing services have suffered a decrease in traffic coming from Google,” Colomo said on a call organized by the Computer & Communications Industry Association, a tech lobbying group.

Alphabet is mulling an appeal of Tuesday’s penalty, but even if that is filed, the Mountain View, California, company will still only have 90 days to comply with an order to stop favoring its own links to online shopping. If it does not, Alphabet faces more fines of up to 5 percent of its average daily revenue worldwide. That would translate into roughly $14 million (12 million euros), based on Alphabet’s revenue during the first three months of the year.

Rather than comply, Google could shut down its shopping service in Europe.

If that happens, “it will mean consumers in Europe are going to be worse off than consumers in the rest of the world,” predicted David Balto, a consumer advocate and antitrust expert who formerly served as the FTC’s policy director. “Consumers rarely benefit when bureaucrats put their thumbs on the economic scales to tip them one way or the other.”

Google’s critics applauded the EU for standing up to the company after the FTC backed down.

“Some may object to the EU moving so aggressively against U.S.-based companies, but these authorities are at least trying to deal with some of the new competitive challenges facing our economy,” said the News Media Alliance, a group representing U.S. newspapers whose revenue has plunged as more advertising flowed to Google during the past decade.

Other antitrust experts believe the fine levied on Google means European regulators are more likely to rein in other U.S. technology companies such as Apple, Amazon, Facebook and Netflix as they win over more European consumers at the expense of homegrown companies.

“We already have been in an information trade war,” said Larry Downs, who studies antitrust issues as project director at Georgetown University’s Center for Business and Public Policy. “But I think it just went from being a cold war to a hot war with Europe.”

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Small Farm, Meet Big Data

It’s one of the biggest challenges of the 21st century: how to feed a growing population without ruining the environment. Farmers may get some help from artificial intelligence and the Internet of Things. As VOA’s Steve Baragona reports, falling costs and advancing technology may put precision agriculture in reach for more farmers worldwide.

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Draghi: Stimulus Could be Scaled Back if Economy Improves

European Central Bank head Mario Draghi signaled the bank could trim back its stimulus efforts if the economy keeps strengthening, but said that any such move would be gradual and cautious.

 

Draghi’s said in a speech Tuesday at an ECB conference in Sintra, Portugal, that “a considerable degree” of stimulus support was still needed and that “we need persistence in our monetary policy.”

 

But he said that the bank’s level of stimulus will be adjusted as the economy improves but would remain supporting of the economy, or “accommodative,” as Draghi put it

 

The euro rose a sharp 0.9 percent against the U.S. dollar to $1.1280 upon the remarks, a sign that foreign exchange traders may have interpreted Draghi’s words as signaling a willingness to withdraw stimulus. Central bank bond purchases and interest rate cuts can weigh on a currency’s exchange rate; an end to the stimulus should mean a stronger euro.

 

Market observers are watching for signals about when the ECB will start reducing its 60 billion euros ($67 billion) per month in bond purchases, a program that aims to increase inflation and growth. The central bank has edged toward the exit in recent comments, saying that risks to the economy have lessened and it could even do better than expected.

 

Draghi has not said when the purchases might be scaled back. They are slated to run at least through year end, and longer if needed. Many analysts think the bank might give a clear signal at its September 7 meeting.

 

Marco Valli, chief eurozone economist at UniCredit Research, said the speech indicated that “the ECB seems on track for a tapering announcement in September.” Valli said in a research note that, absent unexpected trouble for the economy, bond purchases could be reduced to 40 billion euros a month in the first half of 2018 and to 20 billion euros in the second half before ceasing at year end.

 

The stimulus withdrawal decision is being closely watched because it could have wide-ranging effects on investors, governments and consumers. The bond purchases aim to drive down long-term interest rates and raise inflation by sending newly printed money into the banking system and the economy. When they end, rates should rise, meaning higher costs for longer-term borrowers such as people with house mortgages. Savings accounts or other conservative holdings would become more attractive relative to stocks.

 

The ECB is trying to raise inflation from the current 1.4 percent toward its goal of just under 2 percent, a level it considers most consistent with a healthy economy. Inflation has lagged even during 16 straight quarters of growth for the 19 countries that use the euro currency.

 

Draghi said that inflation was not picking up as fast as it typically does. That could be because wage and price decisions were still affected by the crisis and Great Recession. Because of the bout of low inflation that followed, people were still writing smaller increases into wage contracts. He said that such “backward-lookingness” would eventually give way to stronger inflation as the recovery continues but it would take time.

 

 

 

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Cuban Farmland Lies Fallow, Production Languishes, Govt. Report Shows

More than half of Cuba’s arable land remains fallow nearly a decade after a government pledge to cultivate it, and food production is sluggish, according to a government report.

Cuba has yet to publish an overall figure for last year’s agricultural output. But the report released over the weekend by the National Statistics Office indicated only minor improvement in 2016 over the previous year.

The state owns 80 percent of the land and leases most of that to farmers and cooperatives. The remainder is owned by private family farmers and their cooperatives.

Despite the leasing of small parcels of land to some 200,000 would-be-farmers over the last decade, the report said just 2.7 million hectares (6.7 million acres) out of the 6.2 million hectares (15.3 million acres) of arable land available were under cultivation.

The Cuban government often blames bad weather, a lack of labor and capital for poor land use and production, while critics charge it is due to a lack of private property and foreign investment, rickety infrastructure and the Soviet-style bureaucracy.

President Raul Castro made increased food production and reducing the Communist-run Caribbean island’s dependence on imports his top priority after taking office in 2008 from his then ailing and now deceased brother, Fidel.

Castro began leasing land, decentralizing decision-making and introducing market mechanisms into the sector. But most of the effort has faltered and the state has backtracked on market reforms, once more assigning resources, setting prices and controlling most distribution.

Cash-strapped Cuba imports more than 60 percent of the food it consumes at a cost of around $2 billion annually, mainly for bulk cereals and grains such as rice, corn, soy and beans, as well as other items such as powdered milk and chicken.

Last year, $232 million of the imports came from the United States under an exception to the trade embargo that allows agricultural sales for cash.

The country does not produce wheat or soybeans, though experiments are underway to produce the latter. Over the last decade the government has poured millions of dollars into corn, rice, beans, meat and milk production in hopes of reducing imports, but with little success.

Unprocessed rice production was 514,000 tons in 2016, up more than 20 percent from the previous year. But that figure, representing just a third of national consumption, barely surpassed the 436,000 tons reported in 2008 and was less than the 642,000 produced five years ago.

Beans weighed in at 137,000 tons, up more than 15 percent from the previous year and compared with 117,000 in 2012, but little changed from the 2008 figure of 127,000 tons.

Corn, at 404,000 tons last year, was up some 10 percent over 2015 and the 360,000 output of 5 and 10 years ago, but again just a third of national consumption.

Pork and beef production have increased, while milk, chicken and egg production have stagnated.

Export crops, from coffee and citrus to tobacco and sugar cane, have not increased significantly, and in some cases declined.

Tonnage for root and garden vegetables has improved some 15 percent over the decade and reached 5.3 million tons last year, an increase of 200,000 tons. Bananas and plantains increased some 15 percent to a million tons in 2016 compared with an average of around 850,000 tons over the decade.

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US Firm Stops Selling Cladding Used in Grenfell Tower

The American company which made cladding used London’s Grenfell Tower, where 79 people died after the building caught fire, has said it will stop global sales of the product.

U.S.-based Arconic cited “inconsistencies in building codes around the world” for stopping the sales. The company’s shares fell over 11 percent after it was linked to the blaze in London.

Hours after the announcement from Arconic, the Department for Communities and Local Government said that samples from 75 high-rises in England had failed fire safety tests.

The tests were initiated following the Grenfell Tower fire. Grenfell’s exterior insulation is thought to have been responsible for the rapid acceleration of the blaze, resulting in the deaths of at least 79 people, fire officials said.

Grenfell Tower and many of the buildings tested are all part of government-run, low-cost, public housing developments.

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Saudi Business Cheers Leadership Shift, Frets Over Reform, Region

The promotion of Saudi Arabia’s top economic reformer to crown prince has cheered business leaders who believe it will open up new opportunities. But they worry about officials’ ability to implement reforms and about geopolitical tensions in the region.

The Saudi stock market jumped 7 percent in the two days after Mohammed bin Salman, previously deputy crown prince, was appointed last week to be first in line for the throne.

Part of the market’s rise was due to a decision by index compiler MSCI to consider upgrading Riyadh to emerging market status. But much of the euphoria was political; shares in companies closely linked to Prince Mohammed’s reforms were the top performers.

National Commercial Bank, the biggest lender, which is expected to play a big role handling financial transactions related to the reforms, surged 15 percent.

Miner Ma’aden soared 20 percent; Prince Mohammed has labelled mining a key sector in his drive to cut Saudi Arabia’s reliance on oil exports. Emaar the Economic City, builder of an industrial zone which the prince hopes

to develop as an export industry base, gained 16 percent.

Solid political move

Business leaders said the promotion of Prince Mohammed, 31, removed political uncertainty by confirming a smooth shift of power from an older generation of Saudi leaders to a young generation represented by the prince.

“The political transition was very smooth — we expect the reforms to continue,” Muhammad Alagil, chairman of Jarir Marketing, a top retailing chain, told Reuters.

He said Jarir, which has 47 stores, some 39 of which are in Saudi, would open at least six this year and a similar number next year, mostly inside Saudi Arabia.

Fresh opportunity

To some in business, Prince Mohammed represents fresh opportunity in the form of a $200 billion privatization program and state investment to help kick start new industries such as shipbuilding, auto parts making and tourism.

Some executives predicted the progress of these plans, which are still largely on the drawing board a year after Prince Mohammed announced them, would accelerate after his promotion.

“I didn’t see a risk of the reforms stalling or being reversed before, given the political backing behind them. But now the reforms can go ahead with more strength,” said Hesham Abo Jamee, chief executive at Alistithmar Capital.

He added that social initiatives in the reforms would help the economy by stimulating consumer spending.

For example, developing an entertainment sector, in a conservative society which has so far shunned many forms of public entertainment, would create jobs. The government plans an entertainment zone south of Riyadh with sports, cultural and recreational facilities.

Increasing the role of women in the workforce would boost family incomes and could accelerate creation of small businesses such as restaurants, Abo Jamee said.

Repatriation

Prince Mohammed is also architect of a tough austerity policy, including spending cuts and tax rises, that aims to abolish by 2020 a budget gap which totaled $79 billion in 2016.

The austerity has slowed private sector growth almost to zero.

But many in business see austerity as inevitable in an era of low oil prices and are pleased by the prince’s willingness to moderate it to avoid a worse slowdown. To mark his promotion, Riyadh retroactively restored civil servants’ allowances at a cost it estimated at around $1.5 billion.

Privately, many executives expect Prince Mohammed to persuade or pressure wealthy Saudis to repatriate some of the billions of dollars which they are believed to have transferred overseas for safe-keeping.

Other issues

It is not clear what tools he would use — moral suasion, legal action or financial incentives — but his promotion may have given him the political capital for such a sensitive step. Businesses remain worried by two other issues, however.

One is the competence of the bureaucracy to carry out the complex reforms. The government talks of partnerships between the public and private sectors to finance projects, for example, but has not released legal frameworks for such deals.

“Many of the reforms are in name only — nothing has happened. They’re struggling with the details,” said a foreign economist who advises the Saudi government.

Military intervention

The other big worry is rising tensions around Saudi Arabia — tensions in which Prince Mohammed has been closely involved in his role as defense minister for two years.

In addition to its military intervention in Yemen, Saudi Arabia is locked in a diplomatic confrontation with Iran, its allies are struggling in Syria’s civil war, and early this month it cut diplomatic and transport ties with Qatar.

For some in business, these tensions are at best a distraction for the government at a time when it needs to focus on the economy, and at worst risk a more serious regional crisis that could deter foreign investment and endanger the reforms.

 

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Air Bag Maker Takata Files For Bankruptcy in Japan, US

Embattled Japanese auto parts manufacturer Takata said Monday it has filed for bankruptcy protection.

Takata also announced that rival Key Safety Systems is purchasing Takata for $1.5 billion. 

Takata has been overwhelmed with the costs of lawsuits and recalls related to defective airbags linked to the deaths of 16 people and scores of injuries worldwide.

The defective airbags led to a global recall of tens of millions of automobiles. The chemicals that power the airbags were found to deteriorate spontaneously with prolonged exposure to high humidity, causing the airbags to deploy far more forcefully than normal and sending metal and plastic shrapnel into drivers and passengers.

Takata has already agreed to pay a billion-dollar fine to settle with U.S. safety regulators.  Former U.S. Transportation Secretary Anthony Foxx has said that Takata engaged in a pattern of “delay, misdirection and refusal to acknowledge the truth.”

Jason Luo, president  and CEO of Key Safety Systems, said, “Although Takata has been impacted by the global airbag recall, the underlying strength of its skilled employee base, geographic reach, and exceptional steering wheels, seat belts and other safety products have not diminished.” 

The Tokyo Stock Exchange suspended trading of Takata shares Monday and said it would delist Takata stock Tuesday.

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Debt, Protectionism Could Drag Down Improving Global Economy

The global economy has picked up and prospects for the next few months are the best in a long time.

 

But the recovery is maturing and faces risks from populist rejection of free trade and from high debt that could burden consumers and companies as interest rates rise.

 

Those were key takeaways from a review of the global economy released Sunday by the Bank for International Settlements, an international organization for central banks based in Basel, Switzerland.

 

The report said that “the global economy’s performance has improved considerably and that its near-term prospects appear the best in a long time.” Global growth should reach 3.5 percent this year, according to a summary of forecasts, not quite what it was before the Great Recession but in line with long-term averages. Meanwhile, financial markets for stocks and bonds have been unusually buoyant and steady.

 

On top of that, forecasts by governments and international organizations as well as by private analysts point to “further gradual improvement” in coming months.

 

Key risks include a possible weakening of consumer spending across different economies. So far, the recovery has been largely fueled by people being willing and able to spend more. But that trend could fall victim to higher levels of debt as interest rates rise in some countries and as the amount people need to spend to service their debts takes a bigger chunk of income.

 

Countries that were slammed by collapsing real estate markets during the Great Recession seem less vulnerable now, such as the United States, the U.K., and Spain. But debt burdens are more worrisome in a range of other countries mentioned in the report, including China, Australia and Norway.

 

Another risk comes from weak business investment, typically the second stage of recovery after consumers start spending more; yet that kind of spending has lagged its pre-recession levels for reasons that aren’t always clear to economists.

 

The BIS urged governments around the world to take advantage of the economic recovery as an opportunity to make growth more resistant to trouble by implementing pro-business and pro-growth measures.

 

In particular, the report warned against a backlash against globalization, saying that trade and interconnected financial markets had led to higher standards of living and lifted large parts of the world’s population out of poverty. It called for domestic policies to address inequality and lost jobs, saying that changing technology was often to blame, not free trade. “Attempts to roll back globalization would be the wrong response to these challenges,” it said.

 

 

 

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Ford’s China Move Casts New Cloud on Mexican Automaking

A second U-turn this year by Ford Motor Co. in Mexico has raised the specter of Chinese competition for local carmaking, adding to pressure on the industry after repeated threats by U.S. President Donald Trump to saddle it with punitive tariffs.

Ford announced on Tuesday it would move some production of its Focus small car to China instead of Mexico, a step that follows the U.S. automaker’s January cancellation of a planned $1.8 billion plant in the central state of San Luis Potosi.

The scrapping of the Ford plant was a bitter blow, coming after U.S. President Donald Trump had blamed the country for hollowing out U.S manufacturing on the campaign trail, and threatened to impose hefty tariffs on cars made in Mexico.

Since then, rhetoric from the Trump administration has become more conciliatory, and Mexico and the United States have expressed confidence that the renegotiation of the NAFTA trade deal, expected to begin in August, could benefit both nations.

But the loss of the Focus business is an unwelcome reminder of competition Mexico faces from Asia at a time China’s auto exports and the quality of its cars are rising.

“For a long time, the quality of vehicles coming out of China was not to global standards. There was a gap in quality that [favored] Mexico – but that is closing,” said Philippe Houchois, an analyst covering the auto industry at investment bank Jefferies. “That is probably a threat to Mexico.”

In the past decade, global automakers have invested heavily in Chinese factories to make them capable of building cars at quality levels that make the grade in developed markets.

Ford’s decision to shift Focus production for the United States market to China from Mexico shows automakers have increasing flexibility to choose between the two countries to supply niche vehicles to American consumers or other markets.

‘Very Troubling’

Demand for small cars in the United States is waning and General Motors Co. faces a similar situation to Ford’s with its Chevrolet Cruze compact.

Were GM to go down the same path with the Cruze and shift its production out of U.S. factories, it could give more work to its Mexican plants – but might also bring its Chinese operations in Shenyang or Yantai into play.

GM did not immediately reply to a request for comment on its plans for the Cruze.

Studies show Mexican manufacturing is competitive, and business leaders believe that NAFTA talks between Mexico, the United States and Canada could ultimately yield tougher regional content rules for the region that benefit local investment.

Ford said its decision balanced cheaper Chinese labor rates against pricier shipping, but that in the end an already-planned refit of its Chinese factory saved it some $500 million over retooling both that facility and its Hermosillo plant in Mexico.

The volatile state of U.S.-Mexican trade relations also carries big risks if Trump renews his threats to impose 35-percent tariffs on cars made in Mexico.

To be sure, Trump has also threatened to levy 45-percent tariffs on Chinese goods and his Trade Representative Robert Lighthizer said he found Ford’s China move “very troubling.”

Trump’s threats have battered the peso, ironically making Mexico’s goods cheaper. Uncertainty over the future of NAFTA pushed the currency to a record low in January, although it has since rebounded.

That same month, the Boston Consulting Group published an assessment of manufacturing competitiveness that gave Mexico an 11-percent lead over China.

That advantage has prompted global firms to plow billions of dollars into the Mexican auto industry, pushing output to record highs. Some officials in the automotive sector painted Ford’s move as a one-off decision.

“There’s still very dynamic investment and growth in plants,” said Alfredo Arzola, director of the automotive cluster in Guanajuato state, one of Mexico’s top carmaking hubs.

Still, there have been “significant quality improvements” in Chinese cars, consultancy J.D. Power said in a 2016 study.

Chinese car manufacturing could catch up with international standards in China by 2018 or 2019, said Jacob George, general manager of J.D. Power’s Asia Pacific Operations, citing the consultancy’s gauge of “hard quality”, or failures.

However, when measured in terms of “perceptual” quality, China was probably still some 4 to 6 years behind, he added.