US manufacturers are discovering the policies of the Trump administration aren’t like a cafeteria. You don’t get choose which policies you want.
Manufacturers have been among the biggest boosters of President Donald Trump.
“Today, we’re going for the gold,” Jay Timmons, president of the National Association of Manufacturers (NAM; Washington), said in a February speech in Michigan, the first stop in an eight-state tour.
“Manufacturers and manufacturing workers haven’t had a president so focused on our success,” he added. The official said Trump had “transformed the business climate in rapid succession.”
That was after the Trump administration led the charge for a business tax cut late last year. Legislation enacted by Congress and signed by Trump cut the business tax to 21% from 35%. Also, the administration was promoting a $1.5 trillion infrastructure plan, where only 20% of the spending would come from the federal government.
That was then. This is now.
The tax cut is in effect. The infrastructure plan isn’t.
On the other hand, the Trump administration is slapping tariffs of 25% on imported steel and 10% on aluminum. Initially, US allies such as Canada and the European Union were exempted. Now, they’re not. Now, retaliatory tariffs are being placed on US-produced goods. The US is openly squabbling with countries that were once its closest allies.
As a result, there’s more uncertainty for manufacturers. The New York Times reported last week about emails concerning Trump trade policy. The emails were obtained by American Oversight, “a nonprofit set up to investigate the Trump administration,” according to the newspaper.
The emails showed that some manufacturing groups, including NAM, were concerned about US efforts to renegotiate the North American Free Trade Agreement between the US, Canada and Mexico.
“It is hard to have a discussion when no details are provided of where the administration is really going even at a broad level until after decisions have essentially been made,” Linda Dempsey, NAM’s vice president for international economic affairs policy, wrote in one of the obtained emails. The email was sent to a US trade official in October, the Times said.
The NAFTA negotiations haven’t resulted in any agreement to update the 1994 trade pact. Trump, when he ran for president, criticized NAFTA in particular and trade deals in general, saying they took advantage of the US.
More Tariffs Coming?
The steel and aluminum tariffs may only be the beginning. The administration also is looking into whether additional tariffs are merited on cars and trucks.
“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Trump’s Commerce Secretary, Wilbur Ross, said in a May 23 statement. He said the department will examine “whether such imports are weakening our internal economy and may impair the national security.”
National security was also the administration’s stated reason for imposing the steel and aluminum tariffs.
Already, Japanese, Korean and German automakers have US factories to produce cars and trucks for US consumption and to export to other nations.
Many of those factories were established in Southern states that had relatively few investments from Detroit-based automakers. Those factories employ thousands of workers and attracted supplier plants. What’s more, automakers have developed supply chains where shipments crisscross boards. That blurs the definition of what’s an American vehicle and what’s a foreign one.
The outcome of all of this remains to be seen. Regardless, manufacturers shouldn’t be surprised.
Tax cuts are great when you get them. Tariffs may not be so great if your business is affected adversely.
But government policy isn’t cafeteria style, where you get to take this while declining that. All of this was part of what Trump campaigned on. And manufacturing may get all of it, for better or worse.
Bill Koenig, a senior editor for Manufacturing Engineering, covered the auto industry for The Indianapolis Star and Bloomberg News.