The bad economics of Trump's Carrier deal

Trump also lobbied/nudged/cajoled Ford into changing its mind about shifting a sport utility vehicle production line to Mexico from Kentucky, not that doing so actually would have cost American jobs. But Carrier, especially, had become a potent symbol of Trump’s economic nationalism after video of Carrier’s initial offshoring decision went viral. And in response to Carrier’s reversal, Trump took a victory lap on Twitter: “Big day on Thursday for Indiana and the great workers of that wonderful state. We will keep our companies and jobs in the U.S. Thanks Carrier.”

But how many Trump “wins” can the American economy afford? By themselves, the moves by Ford and Carrier are inconsequential — maybe even to Carrier’s workers over the longer term. It’s hardly an uncommon practice at the state level to offer incentives to lure corporate relocations or to keep firms from leaving. But the practice has mixed results. For instance, Dell closed a North Carolina plant in 2009 just five years after receiving millions in state tax incentives to open it. Production then moved to Mexico.

But more broadly, this is all terrible for a nation’s economic vitality if businesses make decisions to please politicians rather than customers and shareholders. Yet America’s private sector has just been sent a strong signal that playing ball with Trump might be part of what it now means to run an American company. Imagine business after business, year after year, making decisions based partly on pleasing the Trump White House. In addition, Trump’s hectoring on trade and offshoring distracts from the economic reality that automation poses the critical challenge for the American workforce going forward.

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