President-elect Trump and the Future of Michigan Manufacturing

Written by: Karl Schneider

Primary Source:  Michigan Policy Wonk Blog, January 17, 2017

During the 2016 presidential campaign, President-Elect Donald Trump focused on returning manufacturing jobs to the United States from other countries like China and Mexico. While there was evidence of the success Trump’s rhetoric among Rust Belt swing state voters (link is external), including his sweep of Pennsylvania, Ohio, and Michigan, the potential for a true manufacturing revival remains heavily in doubt. However, announcements by Fiat Chrysler (link is external) and Ford (link is external) have been heralded as encouraging for by the PEOTUS, and both companies have said at least part of their decisions was based off the plans and policies of the PEOTUS. Michigan has incentivized their investments in an undisclosed packages provided by the state. Michigan Gov. Rick Snyder has heralded the deals as the “re-consolidation of the auto industry back in Michigan” (link is external).

Trump’s chief proposals aimed at raising manufacturing employment focused on creating a ‘big border tax (link is external)’ of 35 percent against companies that outsource jobs to foreign countries, as well as renegotiating NAFTA (link is external) and abandoning TPP (link is external). Trump’s dislike for NAFTA and TPP is shared by some prominent Michigan Democrats including U.S. Sen. Gary Peters (link is external).

Besides a criticism of economic efficiency, much of the criticism of Trump’s proposal of an outsourcing tax centers around fears of a trade war with major economies like Mexico and China. A potential trade war resulting from aggressive tariffs would affect “disproportionately lower-skilled and lower-wage jobs” according to analysis by the Peterson Institute for International Economics (link is external). Analysis of a potential trade war is projected to feature a relative job loss (link is external) for Michigan of 4.6 percent, with particular devastation for manufacturing employment.

Such a focus on increasing tariffs, and shifting towards a more protectionist trade policy fails to account for a rapid shift toward automation where increasing production per person resulted in decreases in manufacturing employment according to a report from Ball State University (link is external). Indeed, this report asserts that 88 percent of manufacturing job losses (link is external) are a result of increased usage of robotics in manufacturing rather than trade.

While Trump’s protectionist trade policies could have some success in creating positive headlines for the PEOTUS, there remain systemic issues with manufacturing in Michigan and other Rust Belt economies that are not addressed by restraining the free trade.

 

Citations:

http://thehill.com/policy/finance/285189-trump-says-he-will-renegotiate-or-withdraw-from-nafta-without-changes (link is external)

https://www.theguardian.com/us-news/2016/nov/21/donald-trump-100-days-pl… (link is external)

http://www.theatlantic.com/politics/archive/2016/11/trumps-road-to-victo… (link is external)

http://www.wbir.com/news/local/ford-cancels-plans-to-build-plant-in-mexico-will-invest-in-michigan/381609814 (link is external)

http://michiganradio.org/post/snyder-hails-auto-re-consolidation-michiga… (link is external)

https://piie.com/system/files/documents/piieb16-6.pdf (link is external)

https://www.bloomberg.com/news/articles/2017-01-08/fiat-chrysler-commits… (link is external)

http://www.conexus.cberdata.org/files/MfgReality.pdf?_ga=1.88120413.7538… (link is external)

https://www.theguardian.com/business/2017/jan/05/toyota-trump-border-tax…

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Karl Schneider
Karl Schneider is an undergraduate student studying International Relations and Economics. He has worked on energy and environmental research sponsored by Penn State University and the National Science Foundation. Karl is also a State Policy Fellow at IPPSR, where he is working on the Correlates of State Policy Project, the State of State Survey, and the 2016 Election.