Nice Little Company Ya Got There. Shame if Anything Happened to It.
Donald Trump puts the squeeze on companies looking to outsource.
On Tuesday, il Duce resorted again to Twitter, the medium best suited to the depth of his thought, to slam another U.S. company. This time it was General Motors.
"General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border," he tweeted. "Make in U.S.A. or pay big border tax!"
The response from GM was, unfortunately, printable: The company pointed out that it makes all of its Cruze sedans in Lordstown, Ohio, and makes a hatchback version for international markets in Mexico. Some of the latter are sold in the U.S.
For that heinous crime, Trump wants to make American car buyers pay more. That'll show 'em.
This is an odd stance for a man whose own businesses also sell products made in Mexico—not to mention China, South Korea, Indonesia, Vietnam, Bangladesh, Honduras, Germany, the Netherlands, India, Turkey, and Slovenia. You'd think someone who does so much outsourcing would be more sympathetic to the practice.
Nope. Last month, Trump blasted bearings-maker Rexnord for a planned move to Mexico. Before that, he famously intervened in Carrier's plans, arranging for $7 million in state tax breaks to keep jobs at a company plant in Indiana. He has threatened to impose a 35 percent tariff on "companies wanting to sell their cars, A.C. units, etc. back across the border."
"Companies are not going to leave the United States anymore without consequences," Maximum Leader has warned. Indeed: Trump's tweets not only cause P.R. headaches, they also drive down stock prices—as Rexnord and GM quickly found out.
The browbeating seems to be working. Last week Ford announced that it would scrap plans for a new plant in Mexico. Instead, it will invest $700 million in Michigan and create 700 jobs. CEO Mark Fields said the move was not the result of any deal with Trump but rather a "vote of confidence" in the pro-business environment he is creating.
Sure it is. And the protection money a florist pays to the mafia is a vote of confidence in the security environment it creates, too.
If Trump had his way, then American companies would shut their overseas operations and bring production home—and that would be great for Americans, right? Wrong.
For starters, exports make up only a small share of the goods sold to foreigners: $1.63 trillion, as Daniel Griswold of the Mercatus Center at George Mason University recently noted. By contrast, U.S.-owned affiliates sell more than $4.4 trillion worth of goods abroad. "That means U.S. companies sell more than twice as much in global markets through their foreign affiliates as they do by exporting from the United States. … Forcing U.S. companies to retreat from global markets will cost them market share, reducing employment at home as well as abroad."
But it wouldn't end there.
Suppose other countries were to adopt Trumponomics. In that event, Toyota would shut down its Georgetown, Ky., plant and lay off more than 6,000 American workers. Another 6,000 workers would lose their jobs when Nissan closed its plant in Smyrna, Tenn. More than 4,000 Americans would be out of work after Honda shut its Lincoln, Ala., plant. And so on.
Some of those workers could apply for jobs at Ford's new plant in Michigan. But why should they have to, when they have perfectly good jobs with Toyota, Nissan and Honda?
If Trumponomics were correct and "bringing jobs home" made people better off, then the same would be true not only for nations but also for states and cities: Residents of Maine would be better off growing their own almonds instead of buying them from California. Minnesotans would be happier growing their own oranges, Floridians would be happier producing their own wool, and New Yorkers would enjoy much greater economic success building their own cars rather than buying them from Kentucky and Tennessee.
Indeed, if Trumpian economics is correct, then the surest route to prosperity would be for people to stop trading altogether. Think how much economic security America would enjoy if people made their own clothes, built their own homes, manufactured their own iPhones, and performed their own surgery.
Nobody would ever have to worry about losing a job to a competitor again, because there would be no competitors.
These are practical considerations, but there are ethical ones to consider as well. When Acme Widgets builds a plant in Mexico, the proper question to ask is not whether it should have built a plant in Oklahoma instead. The proper question to ask is what right anyone has to stop it.
And if Mrs. Gladys Pumpernickel of Walla Walla, Wash., wants to buy a peck of widgets that Acme made in Mexico, what right does anyone have to prohibit her from doing so? It's her money; she can spend it as she likes. She has no moral obligation to buy domestic widgets, or to pay a 35 percent markup on foreign ones. If domestic widget makers want her business then they should earn it.
"We hear terrible things about outsourcing jobs," a famous American businessman once wrote. "But in this instance I have to take the unpopular stance." While outsourcing costs jobs in the short run, "we have to look at the bigger picture… Last year, Nobel Prize-winning economist Dr. Lawrence R. Klein, the founder of Wharton Econometric Forecasting Associates, co-authored a study that showed how global outsourcing actually creates more jobs and increases wages, at least for IT workers. The study found that outsourcing helped companies be more competitive and more productive. That means they make more money, which means they funnel more into the economy, thereby, creating more jobs."
That famous American businessman was, of course, Donald Trump.
This column originally appeared in the Richmond Times-Dispatch.