We’re not much of a fan of that famous line on General Motors that “What’s good for GM is good for America.” It’s a little too cheeky for us. But there is a ring of truth embedded in it, and it’s that a thriving economy is good for this country.
So we are growing more than a little concerned about the Donald Trump administration’s panache for inserting uncertainty into business decisions that could determine the fate of American jobs tied to trade.
Here is what is happening: Companies make investments based on their predictions for the future. Since the 1990s, for companies interested in the United States that future has featured a North American Free Trade Agreement that enabled them to build efficient supply chains across the United States, Canada and Mexico.
And until last week, companies thought they could count on moving goods across NAFTA borders without facing tariffs on such things as steel and aluminum.
The result has been a boon for Texas and the United States, as well as Mexico and Canada. In many cases, parts cross the border several times as products — including automobiles, airplanes and a wide range of other goods — are fitted out with specialized components. In some cases, an item might cross borders seven times before it reaches the consumer market.
The benefit is that companies can become more globally competitive even while the United States preserves or enhances the niche areas of production where it maintains competitive advantages. In other words, over the long-term trade agreements give American workers a better opportunity to beat foreign competitors.
Threatening to upend trade agreements puts that at risk. Companies will delay or cancel plans to build out supply chains in places where tariffs could suddenly be imposed.
So the Trump administration’s new tariffs on NAFTA partners as well as its goal of adding a sunset provision to NAFTA nearly guarantees that fewer companies will allow their supply chains to straddle North American borders. Why invest now if there is a hard-to-quantify risk of new tariffs being imposed?
Instead, companies will likely move production to other countries with low tariffs that are less of a lightning rod in American politics. Or they could just shift to trading blocs without such risk, even if that means cutting American jobs in the process. And there are an estimated 156,000 jobs in Texas alone tied to NAFTA.
The same is true in regard to trade arrangements with the European Union, Japan and other allies. And beyond the business investment, tariffs will hit American wallets.
For example, 90 percent of the steel Plano-based Toyota North America uses comes from the United States. Nonetheless, Toyota estimates that tariffs could add hundreds of dollars to the price of each new car it sells in the U.S.
Amid the uncertainty that Trump’s trade policies create, this much should be clear: Trump’s tariffs will also hit American workers.