Ford’s surprise announcement yesterday that it would cancel a planned $1.6-billion plant in Mexico and would invest $700 million in a Michigan plant illustrates the bind in which President-elect Trump has put business leaders. Ford chief Mark Fields spun the decision as totally good news, but it’s hard to believe he’s happy about it. The larger significance is that Trump is badly muddling his message – promising a wave of pro-business legislation and rulemaking while bullying individual companies in a way that makes the U.S. a less attractive place to do business.
Recall that Trump had been haranguing Ford for months over its plans to build that Mexican plant, sending error-filled tweets that nonetheless made his displeasure clear. Fields had defiantly stayed the course, which makes his sudden reversal all the more shocking. Look carefully at his statement: “We’ve made this decision independently on what’s right for Ford, but we look at all the factors.” You don’t need to be a cryptologist to decode the message. The decision was based “on what’s right for Ford” – that is, we weren’t bullied – but “we look at all the factors” – that is, this wasn’t a normal business decision. How could it have been? Ford’s U.S. labor costs, including benefits, are close to $60 an hour; Mexican autoworker labor costs are a little over $8 an hour, says the Center for Automotive Research. When Fields says “all the factors,” the obvious unmentioned factor has nothing to do with business-as-usual considerations; it’s the risk of angering the tweeter-in-chief.
Underscoring that risk was an apparent coincidence: At 5:30 yesterday morning, shortly before Ford chairman Bill Ford called Trump to tell him about the company’s decision, Trump lambasted GM for selling Mexican-made Cruzes in the U.S.: “Make in U.S.A. or pay big border tax!”
To see why such behavior is corrosive to the U.S. economy, let’s spell out what’s implicit in Trump’s tweets. Company X is getting in the way of Trump’s campaign promises. As president, he can punish that company by imposing tariffs unilaterally within wide constraints. He could conceivably order executive agencies to go after that company, which is illegal but has been done; even without his being explicit, bureaucrats who value their jobs could take it upon themselves to please the boss. In short, it’s personal – Trump vs. Fields, Trump vs. GM’s Mary Barra, Trump vs. Greg Hayes, CEO of Carrier’s parent, United Technologies.
That’s the opposite of the long established rule-of-law business environment that has helped make the U.S. so attractive for employers. It would be a shame if Trump’s impulsive tweeting were to undercut the economic growth he’s trying to spark.
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