The dealmaker is headed to Washington.
Manufacturers and other American companies that buy and sell goods abroad will be paying most attention to President-elect Donald Trump’s views on trade deals such as the North American Free Trade Agreement and the proposed Trans-Pacific Partnership — and on international trade generally.
Trump rode to his party’s nomination with promises of eliminating or renegotiating trade deals — blaming them for a steep decline in U.S. manufacturing jobs — and imposing high tariffs on consumer goods imported by companies that outsourced production to other countries. It was a message he repeatedly hammered home during the general election.
What does Trump’s victory mean for trade and manufacturing in the U.S. and Central Pennsylvania, where making things remains an economic driver?
First, some background on trade deals, campaign debates and the views of the country’s next president.
The gold standard?
TPP is a proposed pact between the U.S. and 11 other Pacific Rim countries: Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. Among other provisions, the deal would eliminate tariffs on U.S. manufactured goods and most farm products.
The agreement, which was announced in October 2015, must be ratified by all 12 nations, which has not yet happened.
Clinton, while secretary of State, spoke in favor of the deal. But by October 2015, as the presidential race was heating up and she was no longer in the cabinet, Clinton broke with President Barack Obama and announced that she had concerns about the deal and was likely to oppose it.
The news was welcomed by Vermont Sen. Bernie Sanders, a TPP opponent who would prove her longest-lasting rival in the race for the Democratic nomination.
Trump, meanwhile, made headlines — and garnered support — for his opposition.
One of the flashpoints of the presidential campaign centered around the resurrection of then-secretary Clinton’s remarks from a 2012 speech in Australia, where she referred to the TPP pact, then under negotiation, as setting “the gold standard in trade agreements to open free, transparent, fair trade, the kind of environment that has the rule of law and a level playing field.”
The remarks were hardly a secret, and the speech remains posted on the State Department website.
But their reemergence clearly hurt Clinton, who took heat from Republicans and members of her own party who opposed the deal and accused her of downplaying or denying her earlier support.
And that played into Trump’s strategy of galvanizing working-class voters — especially in “Rust Belt” states, including Pennsylvania — by promising to end the bleeding of jobs that the Republican blamed on trade deals, such as NAFTA, which enabled manufacturers to move jobs overseas. He also has called for tariffs on imported goods, particularly those sold by companies that outsourced jobs to other companies.
Trump, author of a 1987 book called “The Art of the Deal,” also has said he would look to re-negotiate deals on his own.
Cautious approach
Tina Weyant, executive director of World Trade Center Harrisburg, is taking a wait-and-see approach to assessing how Trump’s victory will affect trade.
“There is a lot of uncertainty as to how quickly some or all of the proposed trade policies could be implemented,” she said.
Some of what Trump proposes is within the president’s power, but not all.
“Restricting imports through high tariffs and re-negotiating existing trade agreements (is) not done unilaterally,” and every punitive action would result in immediate retaliatory actions by affected trading partners,” Weyant said.
“The consequences of this would be far reaching – our exporters will no longer be competitive overseas, and where would Walmart of Target get their merchandise? Think of the jobs related to these diverse industries,” Weyant added.
In addition, the possibility of limiting global trade “will undoubtedly cause concerns, and market reactions may be similar to the ‘Brexit’ vote aftermath,” she said, referencing British voters decision earlier this year to pull their nation out of the European Union. That vote – which is proving complex to carry out – has resulted in a significant drop in value for the British Pound and uncertainty for British companies doing business in Europe, as well as their investors.
‘Predictability’ concerns
Tom Palisin, executive director of The Manufacturers’ Association, worries that lingering political acrimony and gridlock could hinder progress on many vital issues, including trade and manufacturing. His York County-based group is a regional manufacturing and logistics trade association.
“The polarizing election will likely lead to polarized government, which will result in little being accomplished on the key issues impacting manufacturing like tax reform, trade, workforce, regulations (like minimum wage), etc.,” Palisin told the Business Journal.
“Business thrives on predictability and easily understood policies and regulations. With the short-term uncertainty that will result with this election, investment and hiring will continue to be restrained, negatively impacting the economy and manufacturing,” he added.
Both candidates discussed penalizing companies for manufacturing offshore, he noted, saying “this is not a policy that would benefit U.S. manufacturing, as in many cases production offshore is how the companies are able to compete in those international markets.
“Policies that make it easier for manufacturing in the U.S. should be the focus and will attract more investment and jobs to the U.S., not developing another penalty/regulatory structure,” Palisin said.
Automation, regulations
Keith Shoff, CEO and president of York-based Capway Automation Inc., shares Trump’s concern that trade deals have had a detrimental effect on U.S. manufacturing jobs, and will continue to do so.
“To a degree, I have to kind of agree with him,” said Shoff, whose locally owned firm makes automation products for bakeries and other commercial food service companies.
But Shoff cautions that blaming trade deals on the decline of factory employment overlooks two key points: automation, and regulations.
The move by many American companies to embrace new technologies is a major factor in displacing human employees, Shoff pointed out.
“Automation has improved companies’ efficiencies, and that means you’re going to put people out of jobs,” he said.
The offshoring movement has been partially offset by reshoring, in which companies bring some manufacturing back to the U.S.
As Shoff and others discussed in an October Business Journal article, product lines that return to — or remain on — American shores tend to be specialized items that may be high-value or too large to ship easily. Mass-produced commodities, meanwhile, make more sense to produce in countries where production costs are lower, experts say.
Even that, Shoff adds, is changing, as even some commodity items are being brought back by companies concerned about product quality.
“You do get what you pay for,” Shoff said.
For those things still made in America, Shoff has another concern: regulations.
He had feared a Clinton administration’s likely embrace of clean-energy policies — such as those advanced by the Obama administration — would have made it less business-friendly than a Trump White House in that key area.
“Such regulations are a major problem with long-term consequences for companies like ours, who don’t have a specialist focused on implementation,” Shoff said.
Between Trump’s election and Republicans retaining hold of Congress, it seems the pendulum of regulation might likely swing toward fewer restrictions.
Get in on the discussion
As Trump prepares for the White House, issues affecting various industries are weighing on business leaders’ minds. What’s to become of health care? How will the president-elect address trade relations?
Those questions are among the topics CPBJ staff will talk about in a free webinar titled, “We have a winner…Now what does it mean?” Set for 10 a.m. Wednesday, the discussion will provide an early forecast on business issues that the new leader of the country will likely impact.
Click here to sign up.
