The United States has lost five million manufacturing jobs since 2000. Five million!
While over 12 million Americans are still employed in the manufacturing industry, it is not the powerhouse it once was. There was a rapid loss of jobs, a shutting down of factories and increased competition from foreign countries. Combined, these factors created a very unsettling time for the Rust Belt Americans most affected by these conditions. So, it comes as no surprise that they put their foot down and demanded change.
Cue President Donald J. Trump.
Only three days after becoming president, Donald Trump signed a notice that the United States will begin withdrawing from the Trans-Pacific Partnership (TPP) trade deal, fulfilling a major part of his campaign promises. The TPP – a 12-nation deal between Canada, Mexico, Japan, Australia, New Zealand, Chile, Peru, Malaysia, Singapore, Vietnam and Brunei – would have slashed tariffs, deepened economic ties and promoted trade to boost growth. But, as President Trump and many Americans saw it, it was a deal that favored big business and other countries at the expense of American jobs. A 2016 study even estimated that the TPP could cost the United States an additional 448,000 jobs between 2015 and 2025.
But, since the deal was never in effect to begin with, President Trump’s actions are leaving the world questioning what is next for the American worker and the manufacturing industry.
The most notable changes that have occurred since President Trump assumed office are the views and correlating strategies automotive manufacturers have when it comes to production sites. For more than two decades, the auto industry has thrived in Mexico. The fact that Mexico is able to offer cheap labor and access to dozens of markets through free-trade deals helps to explain why automakers have announced $24 billion in Mexican investments over the last six years, according to the Center for Automotive Research. Astonishingly, $50.5 billion in vehicles and $51 billion in auto parts were shipped to the United States from Mexico in 2015, U.S. government data show.
While Mexico’s auto industry is growing at an exponential rate, it is in President Trump’s plan to slow it down by any means necessary. He has proposed a 35 percent tariff on Mexican-made imports, which is forcing automakers to consider alternative options. In order to discuss these alternative options, President Trump met with the executives of General Motors, Ford Motor and Fiat Chrysler and urged them to build new factories in the United States, vowing to change environmental regulations and tax policies to encourage the creation of jobs and production.
Eager to participate in President Trump’s pro-business agenda, Ford Motor Company surprised the world by announcing its halt in construction of a $1.6 billion plant in Mexico. Ford then publicized its alternative plans to invest $700 million of that savings into a Michigan plant where it will make new electric and autonomous cars, noting that Trump's promise to lower corporate taxes and ease regulations has made it more attractive to do business in the United States and is not worried about the possibility of tariffs.
While not having direct involvement at the meeting, Toyota Motor was inspired by the possible regulation changes and announced that it plans to add 400 jobs and invest $600 million in an Indiana plant, aiming to boost production of a popular SUV by 10 percent.
But, every political change that is made comes with a price.
The Center for Automotive Research recently released a study that an estimated 6,700 North American assembly jobs would be lost if a 35 percent tariff on vehicles imported from Mexico were enacted. Why? President Trump’s moves will consequently result in a less competitive automotive and supplier industry, a decline in market share compared with manufacturers in other countries, a severely interrupted supply chain and ultimately pricier cars.
Also, since roughly 40 percent of the parts that go into cars built in the United States come from Mexico, having a 35 percent tariff would force plants in America to shut down because of lack of parts, at least in the short term. In addition, cars assembled in Mexico that use U.S.-made components will affect the American workers who provide those parts.
With only weeks in office, it is too soon to tell how the manufacturing industry will truly be affected by Trump’s actions. But, with renegotiations of the North American Free Trade Agreement (NAFTA) soon to be initiated, things might start to get a little bit clearer.