Metro Detroit just experienced a brutal stretch of heat — temperatures near 100 degrees, with DTE Energy reporting thousands of customers without power at the height of it. It’s a reminder of how much modern life depends on reliable power and air conditioning.
Europe just had the same wake-up call at a much larger scale. Record-breaking heat has swept the continent this summer — but unlike Americans, most Europeans don’t have air conditioning. The heat has caused many of them to reconsider that.
Most of the air conditioners Europeans are now buying are made not in Michigan or other U.S. industrial hubs, but in China — one more example of Europe’s deepening economic dependence on Beijing.
Huawei alone — a company the Pentagon lists as connected to the Chinese government — provides 40% of Europe’s 5G network capacity. Europe also imports about 98% of its rare earth minerals from China, minerals essential to batteries and other high-tech products, including the electric vehicle batteries increasingly built here in Michigan.
European policymakers have made reducing this dependence a priority. That’s an opening for American industry, and especially for Michigan. The same policies that build up Michigan’s domestic supply chains — for AC units, rare earths, chips and telecom — also position American firms to win the business Europe is now looking to send somewhere other than China.
If the U.S. keeps trade barriers low and relations with Europe friendly, American manufacturers like Carrier, Trane and Lennox can compete for that AC demand. Michigan’s deep bench of parts suppliers and skilled manufacturing workers is well-suited to feel the benefit of that order growth.
Rare earths are another front in the same fight. The Trump administration has pushed to rebuild the U.S. rare earths industry, including processing, through permitting reform, low-interest loans and direct investment in domestic firms. Automakers and battery makers in Michigan, in particular, depend on steady, affordable access to these minerals for the EVs and hybrids they build.
Of course, rare earths are just one link in a longer chain of vulnerabilities. Michigan’s auto industry has already lived through what happens when another critical input runs short: semiconductors — the tiny chips that control everything from engine timing to infotainment and safety systems. The CHIPS Act and related federal investments aim to cut U.S. reliance on Chinese and Taiwanese chip production. Taiwan alone accounts for 60% of the world’s supply.
Michigan’s auto industry learned this the hard way. The recent national chip shortage idled plants across the state and cost the industry billions. That’s what happens when critical components are sourced an ocean away.
Fortunately, the Trump administration green lighting a merger between telecom companies Hewlett Packard Enterprise and Juniper Networks has created a stronger U.S. challenger to Huawei in global networking — the infrastructure that underpins the auto industry itself.
Michigan has spent the past decade building itself into a hub for connected and autonomous vehicle technology, from Ann Arbor’s Mcity to the sensor-and-5G networks threaded through Detroit’s streets. A stronger American player in that space gives Michigan’s auto industry a reliable domestic option to build on, rather than depending on suppliers tied to Beijing — and gives us a foothold to compete for that same business in Europe.
None of these strategies are guaranteed to work. The “infant industry” argument in trade policy holds that government support for young industries can help them grow strong enough to compete globally later on. That’s a bet, not a certainty, but the odds improve with scale.
The European Union’s economy has been stagnating. Growth has averaged just 1.6% since 1996, a full point below the U.S. over the same stretch. If Great Britain were a U.S. state, it would rank as the 51st poorest in the union. EU unemployment sits at 5.9% versus 4.2% in the U.S., and Europe’s share of global GDP has fallen from 25% to 15% over the past 25 years. Europe isn’t becoming self-sufficient in these industries anytime soon — and it will keep looking abroad for the AC units, batteries, chips and networking gear it needs.
Michigan — the state that has always powered American manufacturing — is well positioned to compete for that business. Open markets, innovation and competitive industries can help ensure more of what Europe needs gets built in the United States, and in Michigan, instead of somewhere else.
Chris Douglas is a professor of economics at the University of Michigan and co-editor of the Journal of Economic Insight.
This article originally appeared on The Detroit News: Europe needs air conditioners. Michigan should build them. | Opinion
Reporting by Chris Douglas / The Detroit News
USA TODAY Network via Reuters Connect
By Chris Douglas | USA TODAY Network
