The auto sector has been under pressure ever since U.S. President-elect Donald Trump took to Twitter to criticize the manufacturing of vehicles outside of America. General Motors and Toyota have both been targets of this, but one analyst told CNBC that Trump's trade policy is flawed and his trade chiefs were "barking" up the wrong tree.
Barings Head of Multi-Asset Marino Valensise told CNBC Friday that there are three things that the new administration is going to do. The first two include cutting corporation tax and more infrastructure project.
"The third is trade and personally I am very worried about that because the troika that has been put in place – Peter Navarro, Trump's pick as Trade advisor, Wilbur Ross, the Secretary of Commerce designate, and Robert Lighthizer, the United States Trade representative designate – the people who are going to influence trade policies in the States have got very peculiar ideas."
Velensise further explained that the new administration is "barking at the wrong tree" because even China has been losing manufacturing jobs.
"They have lost about 5 million manufacturing jobs in the past five years. The world is moving forward. Less manufacturing and more services," Valensise said.
At the beginning of last year, Chinese markets suffered a massive blow, plunging about 20 percent, amid the release of weaker-than-expected manufacturing data and concerns over central bank policy. Analysts had earlier warned that the Chinese slowdown could have an impact on other developed and emerging markets, causing concern among small investors.
However, those bullish on the economy believe the slowdown was temporary since the country has been in the process of slowly moving its focus from manufacturing to services.
But it seems U.S. President-elect Trump has been on a mission to bring back U.S. manufacturing to create more jobs. Barings' Velensise warned that creating manufacturing doesn't necessarily mean creating more jobs.
"I think people can produce in developed markets at much cheaper rates than emerging markets if they organize factory in the right way," Velensise said. "That is the case of reshoring manufacturing facilities but not creating jobs. That is why I feel his policies are flawed because you may get to reshore but you won't be creating too many jobs in America."
Earlier this week Donald Trump took to Twitter to threaten automakers General Motors and Toyota to bring manufacturing into the U.S. or "pay big border tax".
In response to Trump's tweet, Toyota said in a statement to Reuters that the new Mexican plant will not cut its U.S. employment, adding that it "looks forward to collaborating with the Trump administration to serve in the best interests of consumers and the automotive industry."
Trump issued a separate ultimatum to General Motors to make its Chevy Cruze cars in the U.S. or expect to pay a big border tax.
He has also been pressuring Ford about its plans for Mexico. Two days ago, Ford announced it was canceling its plans to build a Mexican plant, but insisted Trump was not the main factor for the decision.