Donald Trump’s deal with United Technologies to keep 850 Carrier manufacturing jobs from going to Mexico provides a window into how he may operate as President. It's clear he intends to be not just Commander-in-Chief, but Negotiator-in-Chief.
Trump called UTC CEO Greg Hayes two weeks ago to ask him to keep the jobs in the U.S. He used both stick and carrot – threatening to slap tariffs on Carrier imports from Mexico while at the same time promising to cut taxes on the company’s hefty overseas earnings. The tactic worked. Here are some questions and answers about the deal:
Could the President really have imposed tariffs on Carrier’s imports? Maybe. Apparently the President has some authority to impose tariffs on companies acting in a way that he deems against the national interest. But the move would have sparked outrage from U.S. businesses as well as the international community.
Could President Obama have cut the same deal? Doubtful. In this case, it was the carrot, not the stick, that carried sway. Trump’s election, along with Republican majorities in both houses of Congress, has raised the possibility that a cut in taxes on repatriated earnings could really happen – a savings for UTC that would be measured in billions and dwarf the $65 million a year saved by the move to Mexico.
Isn’t 850 jobs pretty small in the scheme of things? Yes. But the cut in corporate taxes, if it happens, could lead other big companies to make similar decisions to invest in the U.S.
Will those jobs still be in Indiana ten years from now? Probably not. Even if a cut in corporate taxes sparks a resurgence in U.S. manufacturing, technology is rapidly eliminating jobs on the factory floor. But if the past is any guide, there will be new jobs created, for those who have the necessary skills.