Donald Trump, polarizing showman that he is, proved that he won’t wait until inauguration day to start his politically charged quest to Make America Great Again, whatever that means. However, political optics aside, his interventions and deals with large companies, and car companies in particular, are scaring the shit out of me.
A quick note to those who expect a one-sided polemic on Donald Trump: this isn’t one. I am a conservative, primarily on economic matters, but am neither a Trump supporter nor a detractor. And I find myself with increasing concerns about how Trump seems to see his role as president as being someone who should interfere with free market economics.
In fact, the latest example of this came down the Twitter just as I was writing this piece:
Perhaps one of Trump’s key attributes is the fact that he thrives on deals where he can leverage his assets into creating more power and wealth for his businesses, his name recognition, and by proxy, himself. He successfully leveraged his brash and crude attitude in politics to destroy his Republican competition and played the law of averages to spread his message, in any context, via the media only too happy to regurgitate his often nonsensical tweets, speeches, and actions.
It’s safe to say that Trump understands how the game is played and he knows, perhaps better than most give him credit for, how to game the political system for personal gain, and that can make him a very dangerous man indeed when given the opportunity to make the rules that businesses must follow.
Earlier this week, Trump tweeted to the head of General Motors that they’d face a stiff border tax if they didn’t stop their production of the Chevy Cruze in Mexico.
This comes off the heels of a political move by the Trump campaign to entice the air-conditioning company Carrier to keep jobs in the country instead of send them to Mexico. This incentive was in the form of specialized tax breaks.
Ford CEO Mark Fields also announced that the company would be halting plans for a $1.6 billion plant in Mexico and opted to re-tool a plant in Michigan, adding 700 jobs in the process.
While some speculated on whether this was due to Trump’s policies, Fields called it a “vote of confidence” for the Trump Administration, after months of conflict between the then-candidate and the company.
Following suit, Toyota Motor Corp. President Akio Toyoda said that Trump’s threat of tariff on production of a car made in Mexico would also be taken into account, but no decision would be made as of yet regarding their plans to develop a Mexican-made Corolla in 2019. Then today’s tweet, addressing that very plant.
What sets a dangerous precedent is that in all of these instances, Trump, and Trump alone, is the arbiter of which businesses may live and which may die, based on criteria that his personal businesses don’t even follow.
Every job saved then acts as validation for his actions, retweeted ad infinitum, or until people realize that we gave one man way too much power over our buying decisions.
He’s setting backroom meetings with the heads of companies to work out agreements, in which he uses mafia logic to give companies the choice to essentially accept a gift in anticipation of future payback, or wake up next to a severed horse head. “Gee, that sure it a nice plant you got there. It would be a shame if tariffs made it impossible for you to compete in the market.”
Globalization, both in concept and in practice, has its upsides as well as its downsides. It has been touted by Trump to be the source of many of the country’s economic ills. A company selling things in Mexico or another country where the cost of labor is cheaper is likely do so because they sell a less expensive product with slimmer margins.
However, the reality is that these cheaper goods—whether it be cars or laundry detergent at Wal-Mart—sometimes come at the cost of American jobs that have been priced out of relevance in their respective industries because of global competition. We simply can’t have both high-paying jobs for unskilled and entry-level skilled labor, and cheap cost of goods as the product of that labor. (Also, Trump and others forget the role automation, robots and other technologies have had in changing the face of manufacturing.)
Nevertheless, placing tariffs on said companies that choose to outsource their labor necessarily does more harm than good.
The only possible outcome of arbitrary tariffs would be to increase the cost of goods and decrease competition in the market. With these Mexican-built, small cars essentially becoming more expensive and less common in the marketplace, it hits those who rely on them the most, and those are almost always people who can’t afford much else.
While an argument could be made to generally lower corporate tax rates to bring those companies back (or at least get rates in line with that of Scandinavian nations), there’s a huge difference between an across-the-board tax decrease and a one-off reciprocal backscratch-a-thon, as was the case with Carrier, and likely will be the case for any large company that “chooses” to stay in the country during his Presidency.
What’s even more confusing is that self-proclaimed fiscal conservatives like Newt Gingrich, who denounced the idea of Barack Obama using taxpayer money and government influence to shape the auto industry and keep jobs in the United States in 2008, now applaud Trump’s actions against companies that work in their own best interests.
For these people, it seems as though the cliff is still within sight and fast approaching, but the only difference is that their guy is driving, forgetting that he hasn’t actually hit the brakes yet.
To be clear, they’re both cases of crony capitalism, government intermingling with big business behind closed doors, then coming out and proclaiming that they understand the plight of the working man, and that he is safe for now. The big business can maintain its market share and any competition that wants a piece of the pie can go fuck itself, with the most extreme innovation being relegated to the regulatory gray areas.
In the auto industry, examples of this would be companies akin to Tesla and Uber, both companies that have had bouts with legality and regulation, despite having products that are now considered market staples in their respective industries.
While we’re all expecting Trump to attempt to construct an actual level playing field for small businesses in terms of lessening regulation that larger businesses can absorb, he’s started off his political legacy by poising himself as a leader who instinctively knows what’s best for the market and the American people. He alone can fix it, he says, and that means he alone knows what is best for all.
The way I see it, he’s currently using his position as the leader of the free world as leverage to make companies, both large and small, do his bidding, with stock prices fluctuating with every sleep-deprived tweet.
This is textbook authoritarianism. And it only takes one bad deal to realize that the whims of one man can’t save an economy, but they can sure as hell destroy it.
I’d love to be wrong about this, and I hope Trump’s policies will bring in much-needed innovation through a freer market, but at this point, the only thing I’m seeing is the public applauding a fireworks show while their house catches fire behind them. I pray they turn around.