Carrier deal raises questions about what Trump offered
WASHINGTON — President-elect Donald Trump’s newly announced agreement to save more than 1,000 jobs in Indiana gave him the kind of trophy he covets: a tangible victory that matches his campaign promise to serve as dealmaker in chief.
But its long-term value will depend on what Trump gave up to keep those factory jobs from going to Mexico and whether he is able to craft a successful fiscal policy that has a broader impact on the economy.
“This is an unquestionably positive development for the workers who otherwise would have lost these good jobs,” said Jared Bernstein, a senior fellow at the Center for Budget and Policy Priorities and former economic adviser to Vice President Joe Biden.
“But to try to pick off jobs firm by firm with tax breaks and regulatory goodies, it won’t work,” he said. “That’s just not sustainable.”
Throughout his campaign, Trump railed relentlessly against Carrier Corp.’s decision to ship1,400 manufacturing jobs to Mexico, using it as an example of all that was wrong with the U.S. economy and all that he would set right when he took office. He threatened to impose 35 percent tariffs and renegotiate trade deals with Mexico to stop Carrier and other companies from outsourcing jobs.
Trump began speaking directly with Carrier’s parent company, United Technologies Corp., after he won election, securing a brief announcement late Tuesday from both Carrier and Trump that most of the jobs would no longer be shipped abroad.
But details of what Trump and Vice Presidentelect Mike Pence may have given up, or the threats they may have lodged, remained elusive. Trump’s team and Carrier deferred such explanations until a formal announcement in Indianapolis today.
Steve Mnuchin, Trump’s newly announced pick to be Treasury secretary, called the deal a “terrific opportunity” for the incoming administration and said it came about because Trump and Pence were willing to Steve Mnuchin, Trump’s choice to be Treasury secretary, called an agreement to save Indiana jobs a “terrific opportunity.” listen to businesses.
“The president-elect and the vice president[-elect] picked up the phone and called the CEO of the United Technologies and told them we want to keep jobs here,” he told reporters at Trump Tower in New York on his way to meet with Trump on Wednesday.
But the jobs saved are a trifle for a U.S. economy adding an average of 181,000 jobs a month this year — and a tiny percentage of the 197,000 employees of United Technologies.
Carrier said Wednesday that “incentives offered by the state were an important consideration, along with the incoming administration’s promises of a better business climate,” in keeping its gas furnace production in Indianapolis. The company added that it still believes “in the benefits of free trade” and that businesses need broader solu- tions to keep the country competitive.
The show of strength might send a signal of resolve to other companies considering offshoring, and it buys Trump time to craft a policy to match his top campaign promise.
In a similar vein, Trump offered sketchy details Wednesday about his latest efforts to wall off his businesses from the appearances of conflict of interest that have dogged him.
“Legal documents are being crafted which take me completely out of business operations. The presidency is a far more important task!” he tweeted.
Trump promised to provide new details on his plans during a Dec. 15 news conference, but offered few answers to how he would prevent a conflict, given that his children plan to retain full control. Trump and his aides did not say whether he would relinquish ownership.
The Carrier deal’s merits will depend heavily on specifics as well. Trump’s staff said Wednesday that Pence, who remains governor of Indiana and has a history of offering economic incentives to private industry, was heavily involved in negotiations with Carrier, which makes heating and cooling equipment. Pence’s office declined to answer questions.
As the incoming president, Trump has significant leverage with United Technologies, a major defense contractor. In 2015, the company had $5.6 billion in sales to the federal government, 10 percent of its total sales, according to United Technologies’ annual report.
That federal business might have been a factor in Carrier’s decision to keep jobs in the U.S., said John Eade, director of portfolio strategy at investment research firm Argus Research.
“My guess is that the new administration offered some carrots — potential for lower taxes, a potential change in trade policies, etc. — as well as a stick: less certainty on U.S. government contracts, which are significant for several of United Technologies’ other businesses,” he said.
The Carrier deal could prompt other companies to try the same tactic, predicted Dan Ikenson, director of the Center for Trade Policy Studies at the libertarian Cato Institute think tank. “It creates a shortterm political victory for the president-elect, but it opens up a Pandora’s box in the sense that other companies are going to want the same sort of handout,” he said. “It’s better to have an overall policy that companies can bank on.”