The Carrier plant in Indianapolis that Donald Trump mentioned frequently on the campaign trail and famously returned to during the transition is preparing to lay off 600 manufacturing workers next month, according to CNBC’s Scott Cohn, who observes that the “deal” Trump and then-Gov. Mike Pence struck to save the plant “is not living up to the hype.”
The production work is shutting down, not because there isn’t demand for the products but because the company has determined that it is more profitable to do the work in Mexico.
Per the terms of the deal, Carrier will continue to employ slightly more than 1,000 people at the location. But of those, only 700 are the manufacturing jobs the argument was about — “the rest are engineering and technical jobs that were never scheduled to be cut.” In exchange, Carrier is getting $7 million in state incentives, which it is pairing with $9 million of its own money to make a $16 million investment in the facility. Trump characterized that investment as being about creating jobs, but “United Technologies CEO Greg Hayes told CNBC in December that the money would go toward more automation in the factory and ultimately would result in fewer jobs.”
Meanwhile, earlier this week Ford announced that it won’t, as was rumored earlier, be shifting Ford Focus production to Mexico. That would be a win for Trump’s Twitter-based industrial policy, since it’s exactly what he asked the company to do. Except production isn’t staying in the United States either — it’s going to China, where the overall supply chain will likely end up involving much less US-made content than a plant in Mexico would.
Under Trump, the American economy keeps chugging along regardless in a basic continuation of the trend that existed throughout 2016. But these stories are reminders that beneath all the feisty rhetoric around trade, there’s no real strategy or vision to Trumponomics.
Trump can’t govern by stunt
The Carrier deal was essentially the high point of the Trump presidency, despite having inconveniently taken place before Inauguration Day. And since then, many wags have had occasion to wonder why Trump hasn’t tried to repeat the performance.
The basic reason, visible to people familiar with the details of the deal and the scale of the numbers involved, is that there was simply no way for this to scale. The Carrier situation was an absolute triumph of public relations, because months of slagging the company on the campaign trail had built up an enormous amount of dramatic tension and a sense of high stakes. But the total number of jobs involved was extraordinarily small relative to the national economy, and the terms of the deal were so generous to Carrier that you couldn’t really repeat the performance.
The sheer amount of time and money expended per job was too high for the president of the United States, and any effort to follow up on what was really happening would inevitably reveal that lots of jobs were still being lost.
Ultimately, like any president, Trump’s record is driven by big-picture macroeconomic factors not small-scale deals. By the winter of 2016-2017 he inherited an economy that finally had a labor market in decent shape but that was suffering from sluggish productivity growth and still seemed somewhat short of full employment. Since taking office, we’ve continued to steadily add jobs, albeit at a somewhat diminished pace from where we were in 2016. But there’s no miracle transformation.
The Trump trade mirage
One of the most striking divergences between candidate Trump and President Trump is that a candidate who really emphasized “bad trade deals” as a critical economic factor and promised a dramatic new approach to American trade policy has, in practice, merely tinkered around the edges.
Trump drove a stake through the heart of the already-dead Trans Pacific Partnership but hasn’t withdrawn from NAFTA, imposed broad 35 percent tariffs on imports, or done anything to impede international capital mobility. To the extent that his policymaking departs from ideological free market orthodox, it does so in favor of a highly personalized approach that emphasizes Trump’s alliances with major high-profile American companies. He does high-profile meetings with the executives of large incumbent technology companies, visits Boeing plants, and brags about having the former president of Goldman Sachs in his Cabinet without talking much about encouraging competition.
That pro-business philosophy has fundamentally limited Trump’s actions on trade. He may deliver targeted protection for the American steel industry (as Barack Obama and George W. Bush did at times) but he’s not going to do anything that would fundamentally jeopardize big companies’ interests in cross-border supply chains. With various acts of corruption and possible Russia-related malfeasance swirling around him, Trump requires the rock-solid support of the business community to maintain his rock-solid support in congress. That means if Carrier wants to ship jobs to Mexico and Ford wants to build cars in China, nobody is going to stop them.