I heard from more than a few folks last week in response to my post “Lean Manufacturing in the Age of Trump” who were less than optimistic about his chances for success. While I am still optimistic that he will do as he pledged, the doubters have plenty of reason to doubt. The opponents of leveling the American manufacturing playing field are many and formidable.
You would think that NAM – National Association of Manufacturers – would be his biggest supporters, but then again, you would think that an organization with a name like that would actually be composed of American manufacturers. Instead, 21 of its board members are not American companies, but hail from Japan, Germany, the UK and elsewhere. For that matter, 38 of its board members are not even manufacturers, rather they are accounting companies, software outfits, consultants, distributors of imported stuff and logistics firms. Who knows what their interests are but American manufacturing prowess is not likely to be at the top of their lists.
The manufacturers in NAM are overwhelmingly publicly traded multi-nationals – almost 2/3 of the 200 member board. Most of these guys have factories in cheap labor places and virtually all of them rely on components imported the third world. Barely 10% of NAM’s voice consists of the small and medium sized, privately held, truly American manufacturers who are the core of the manufacturing economy. NAM was all in on fast tracking the TPP and they will not be advocates of Trump’s plans for import tariffs. When it comes to manufacturing, the status quo suits NAM just fine; all they want is more grease on the skids to bring stuff in from the third world even faster and cheaper.
President Trump will also encounter something he has not experienced thus far in his fledgling administration – and that is Congressional bi-partisanship. Unfortunately, that will be in the form of bi-partisan opposition. Perhaps the political winds have changed things enough – note how fast Hillary Clinton ran away from her previous support for TPP – but the fact is that 28 Congressional Democrats and 13 Senate Democrats voted with almost all of the Republicans to fast track the TPP. Perhaps all of these politicians are just naïve when it comes to how unlevel the playing field is when trade agreements allow manufacturers to bypass all of the environmental and worker safety and health regulations (and their associated, massive costs), and maybe the politicians are simply in Wall Street’s hip pocket. Either way it is far from assured that Congress will support his plan.
Today Trump is meeting with a gang of retail CEO’s from Target, Gap, Walgreens, JC Penney and the like who are there to voice their opposition to his planned tariffs. Their argument – “the retail industry's position as America's largest private-sector employer”, and how tariffs will increase their costs and prices. Never mind that they are by and large employers of folks at minimum wage or not much better, that a slew of those employees are part time with no benefits. And never mind that the jobs Trump is trying to create (or re-create) pay well and have long been the key to middle class America. No, these folks only know a race-to-the- bottom strategy; cheap labor and cheap prices and have long ago abandoned any thoughts of creating customer value in any meaningful way. The idea that energizing manufacturing, creating customers with more money to spend, and changing the dynamic in their industry terrifies them. Those customers will make different buying decisions and that means changes their MBA programs didn’t prepare them for.
And then there is Trump’s own Manufacturing Council which is laden with publicly traded outfits that stand to lose quite a bit from anything that drives up the cost of imports. It has some pretty capable folks who could be helpful in his efforts – the likes of John Ferriola from Nucor, for instance – but it is laden with multi-nationals and CEO’s like GE’s Jeff Immelt who have a long, unblemished track record of creating manufacturing work for just about everyone and anyone except Americans.
The money lined up against Trump’s manufacturing resurgence is substantial. As I wrote earlier, betting against Trump doing exactly what he said he would do is a lousy bet based on the first month of his administration, but this one will take more than a hastily scribbled executive order. The swamp he promised to drain is still very much intact and the population of alligators and swamp rats looking to keep the gravy train rolling are plentiful.