Trump Is Turning American Companies Into Reality-Show Contestants
What happens when the satisfaction of the president becomes an important business consideration?
On Thursday, President-elect Donald Trump took to Twitter to once again direct public anger towards a global automaker for investing in factories in Mexico rather than the U.S., and to threaten trade barriers. “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S.,” he wrote. “NO WAY! Build plant in U.S. or pay big border tax.”
“Toyota has been part of the cultural fabric in the U.S. for nearly 60 years,” Toyota said in a response posted to its website that also corrected Trump on the location of the factory in question. While Toyota did not signal it would accede to Trump’s demand, it also took care to add that it “looks forward to collaborating with the Trump Administration to serve in the best interests of consumers and the automotive industry.”
This marked Trump’s third tweet-attack on a car company this week, all of them focusing specifically on manufacturing or assembly plants. Why is he going after the auto industry? While carmakers and the car market are still a huge, important part of the American economy, his outsized focus probably has more to do with symbolism. The nostalgia Trump has successfully played on harkens back to the heyday of the manufacturing age, a time when American society was based around an industrial model that’s called, after its creator, Fordism. What Trump wants to be seen as fighting for is not the policies that recently created a record-setting 75 months of job growth, but for the revival of the prospect of “a job at Ford’s,” an old phrase used to refer to lifelong, well-paid employment and a visible path to the middle class back when the workers building Model C’s made double what their counterparts at Dodge or Chevrolet did.
Because Trump’s moves are (or seem) more calibrated for political messaging than for policy effectiveness, one of the most striking things about his week of tweets criticizing international companies for doing business internationally is how paltry the number of American jobs he’s actually concerned himself with is, in the scheme of things. In total, it's in the neighborhood of 3,000—roughly the number of jobs the U.S. economy added in one third of one average day of August 2016, a strong-ish month for the recovery. Plus, notably, he’s singling out factory investments in Mexico while ignoring relevant examples in Canada, further evidence that his motive may be more scapegoating than it is actually helping people.
It’s extremely unlikely that Trump will ever warm up to globalization, which in turn makes it unlikely that he’ll scale back his fiery condemnations of firms—automakers and others—that import goods manufactured abroad into the U.S. What does Trump’s focus on specific companies—and often on relatively small decisions those companies make—mean for American society, and specifically for American business? Under Trump, many companies will (and already do) feel pulled two ways—in one direction towards their interests in capturing the economic efficiencies of globalization and in the other direction toward appeasing a U.S. president whose outbursts and obloquies are unpredictable and bad for their business, and who has a personal stake in scoring political wins by keeping manufacturing domestic, efficiency be damned.
From his behavior so far, it seems that Trump thinks a big part of his job will be to examine and adjudicate particular companies’ behavior and to decide what’s allowed and what’s fair on a situational basis, not just on a policy one. Without hyperventilating over the term, this means that in one small way he wants to operate like a king.
This brings up an important difference between a king’s court and an administration. An administration is made of public policies, and of the politics by which policies live or die. It’s outward-facing, making decisions about the government as it relates to society, not the other way around. When the personal traits and lives of administrators become the main story, for example when political scandal erupts, it usually means something has gone wrong for them. A court, on the other hand, deals in palace intrigue. The players in power, the courtiers, are themselves the story, and they are supposed to be.
While Americans certainly have an appetite for obsessing over the private lives of the powerful, the U.S. has traditionally been suspicious of the politics of personality; when George Washington’s critics wanted to insult him, they called him George IV, as though he had merely succeeded the English monarch. Trump, though, has not worked to avoid the impression that he is running a court or something that looks very much like it—with Mar-a-Lago and Trump Tower cast as Versailles, much of the news cycles in the transition period revolving around the changing fortunes of those in the inner circle as they relate to him as the center of power, and upturned norms against placing family members in close, official orbit.
Whatever else may be said about courtly politics, it is entertaining. Henry VIII put on a show so good it’s still a major fascination centuries later, a PR coup Survivor and The Bachelor and The Real World could only dream of. Like reality-show contestants, businesses that want to compete and survive in an environment in which the president’s pleasure or displeasure can affect the bottom line will want to perform and to make sure the showrunner stays well-liked and rich.
But while looking out for the fate of particular factories carries symbolic weight and may be good politics, Trump’s capricious outbursts about certain manufacturing jobs in the automotive sector probably don’t make sense in terms of actually producing good jobs. He’s claimed credit for several victories on behalf of domestic manufacturing, including by Ford and GM. But what really influence an auto giant’s decisions are usually larger, structural factors.
Some may be bigger even than wage differences. For the increasingly global world car market, where the same models are sold across different continents, another key factor is free trade (and close-to-free trade). One reason Mexico is a desirable place to manufacture the cars that have been the object of Trump’s attacks—the Chevrolet Cruze, the Ford Focus and C-Max, and the Toyota Corolla—is that these are models that sell in car markets around the world. The Ford Focus is the third-best selling car in the U.K., for example, while the Mustang being built in Flat Rock, Michigan, by contrast, started being produced for left-side driving, with the driver's seat on the right, for the first time this year, more than six decades after its U.S. debut.* Why does this make Mexico more desirable to automakers? Because Mexico has free trade agreements with 45 countries, more than double the U.S. network of merely 20.
In what Trump claimed earlier in the week as a victory of his own year-long Twitter campaign against Ford, the company decided to shift plans from building a small-car plant in Mexico to expanding facilities in Michigan. But publicly, the company attributed the change primarily to shrinking demand for the kinds of cars the Mexican factory was made to build. Further evidence that Trump wasn’t the deciding factor was that the announcement coincided with the news of ambitious projects in electric powertrains, including a hybrid engine for its F-150 pickup—the best-selling vehicle in the world—that will allow the truck to operate as a generator at work sites. These are the sorts of initiatives that require engineers to work on new technology, and so make more sense to locate near Ford’s Dearborn, Michigan, base.
And yet, even though Ford had perfectly compelling economic reasons for abandoning its plans in Mexico, the company was careful to curry favor with the president-elect in its announcement. In other words, in the new business environment under Trump, to look out for themselves, companies will have an incentive to act in service of a politician by doing what makes him personally popular. There is a term for this: crony capitalism.
This is sharply different from how businesses have always had to consider government policies in America, where they may have been able to win government approval and benefits—say, for solar-energy projects from an administration with a green-energy policy agenda. So the defining feature of the government’s hand in the private sector is not simply that the decisions of government officials create winners and losers—that is always the case. What’s different is that businesses will have a motive not to displease the president himself, as opposed to the government more generally, and they will be weighing how strong that incentive is against other interests. Case by case they may opt for half-measures (like Ford did), or they may decide the benefits of Trump’s favor aren’t worth the costs. But the message is clear. If they want to thrive in the Trump years, businesses are going to have to consider how to stay in the leader’s good graces.
* This article originally misstated that the Mustang began being produced in left-hand drive for the first time this year. We regret the error.