A turbulent presidential election may finally be over, but for manufacturers many questions remain about what a Donald Trump presidency will mean for their industry. It will be some months before we see which campaign promises President-elect Trump is able to enact and what their ultimate impact on hiring will be.
In the meantime, manufacturers should be aware of the issues at stake. Below are some of the policies that Mr. Trump has discussed and some thoughts on their potential impact on manufacturing hiring in 2017.
Renegotiating or repealing NAFTA
One of Mr. Trump’s most frequently stated goals during the campaign is to renegotiate or exit entirely from the North American Free Trade Agreement. Mr. Trump has called NAFTA the “worst trade deal maybe ever signed anywhere,” and believes it resulted in the loss of American manufacturing jobs since it was signed into law in 1994.
Mr. Trump could withdraw from NAFTA if he chooses – the President can withdraw from the deal without Congressional approval as long as he gives Canada and Mexico six month’s notice.
Eliminating tariffs between the US, Canada and Mexico makes it easier for American manufacturers to move jobs outside of the US. This has led to some losses of US jobs, but NAFTA may also have helped US companies become more globally competitive through supply chain optimization. Reinstating some or all of the tariffs on Mexican and Canadian-made goods might mean that US manufacturers decide to bring jobs back on-shore. However, reinstating tariffs could also mean that prices for US goods would increase, potentially reducing demand for those goods and leading to job losses.
It’s difficult to know what the net effect of withdrawing from NAFTA would be on manufacturing hiring, but it’s worth considering all the dynamics at play.
Not ratifying TPP
This one is a virtual certainty. Mr. Trump has said that he will abandon the Trans-Pacific Partnership (TPP) agreement on his first day in office. The deal’s other signatories are already looking to support China-led trade deals in place of TPP.
The demise of TPP is probably good news for US manufacturers. A non-partisan study by the US International Trade Commission predicted that US manufacturing output would decrease slightly under TPP. The deal would likely have led to further offshoring as well, so US payrolls could benefit from Mr. Trump’s decision not to ratify it.
Limiting guest worker programs
In his YouTube address, Mr. Trump said that he plans to “investigate all abuses of visa programs.” What he means by that is unclear, but some analysts believe that he will tighten requirements for the H-1B visa program. This could make it challenging for manufacturers to staff some positions, particularly in technology manufacturing.
Changing the minimum wage
Mr. Trump’s views on the minimum wage have vacillated over time. At one point he supported raising the federal minimum wage to $10, but more recently he has stated that “wages are too high” in the US, suggesting that he is unlikely to support any increase in the federal minimum wage.
One study found that 5.3 million manufacturing workers in the US (35% of all manufacturing workers) currently make less than the $15 minimum wage recommended by some Democrats, so the impact of changes to the minimum wage is significant. Keeping the federal minimum wage low should mean that manufacturing payrolls hold steady or increase, all else being equal.
Rethinking the Paris Agreement
Mr. Trump at one point pledged to withdraw from the Paris Agreement, which calls for participants to meet specific, measurable goals in reducing their use of carbon-based energy. But more recently he stated that he has “an open mind” about the agreement and needs to study it further before making any decisions. The US can withdraw from the agreement, but it would require a three-year notice period.
Typically, any regulation on energy sources results in higher costs for manufacturers, which could dampen hiring. The Heritage Foundation estimates that the US manufacturing sector would lose 206,140 manufacturing jobs by the year 2040 if the Paris Agreement is upheld. Should Mr. Trump withdraw from the agreement, the impact on manufacturing hiring could be positive.
With the exception of TPP, it’s hard to know where these issues will shake out. Mr. Trump’s thinking may evolve before he takes office, and the Republican Party may not support his proposals. For the moment, manufacturing companies will have to wait and see.