Tanking America’s manufacturing legacy

Donald Trump owes his election, in significant part, to the failure of his predecessors, Democrats and Republicans, to serve as good stewards of America’s manufacturing legacy, and the workers, communities and regions which depended upon it. Through both trade and tax policy the last four Administrations tilted towards a financial, service and commodity based U.S. future — and by election day 2016 had managed to destroy 30 percent of manufacturing jobs, 6 million in all.

Trump campaigned as the rescuer who would bring back those blue-collar factory jobs. Instead he is poised to destroy what remains of that legacy, perhaps unwittingly, perhaps uncaringly, but with devastating thoroughness.

{mosads}Last week Bloomberg News called out “Detroit’s Worst Day” since the 2008 bankruptcies, as Ford joined GM and Chrysler in dramatically lowering its profits projections. Ford said it would be cutting $11 billion in expenses, only days after the entire auto industry (with a slight dissent from the UAW) desperately tried to get the Trump administration to drop its plans to launch a tariff driven trade war over imported autos.

The companies are already hurting because steel and aluminum tariffs have driven up their costs and domestic auto sales are flattening out. Ford has already been hurt in China by the fact that its model line is aging and outdated. Meanwhile, ongoing trade disputes are cutting foreign sales and raising domestic costs, not only for autos but for a wide range of U.S. manufacturers.

The mammoth corporate tax cuts sped through Congress by Trump and the Republican leadership spectacularly ignored the powerful tax code incentives for companies to shift operations overseas. Predictably, the promised avalanche of jobs coming back to the U.S. has not materialized, cornering Trump using tariffs as a bludgeon to deliver on his promise. Everyone in manufacturing has told him that this mania ignores the complexity of global supply chains and, in isolation, will simply weaken — and is already sapping — the sector.

For the auto industry, historically the heart of a manufacturing economy, Trump has worse news in store. Globally, autos face a technology revolution unprecedented since the early 20^th century. How to modernize an industry in which domestic profit margins have rested on tariff protected, technology sluggish SUV’s and light trucks bedeviled the Clinton, the Bush and the Obama administrations. All, however, understood that modernization and progress were essential for the industry’s future.

Not so Trump. Asked by the industry to marginally soften the emission standards agreed to under Obama for the years 2021-2025, Trump instead launched an all-out war against the very concept of using regulation to ensure that the U.S. makers kept up with innovations in the rapidly growing, and furiously innovating, Asian markets.

Trump’s latest proposal: freeze technology progress in the U.S. auto market, and strip California and its partner states — almost half of the U.S. auto market — of their legal right to set tougher emission standards if Washington lags. If implemented, this will leave the U.S. auto market along with Africa, as the world’s dumping grounds for outmoded models, wasteful engines, and dirty tailpipes. 

Europe, China, Japan, India, and most of Latin America will insist on innovative technology and rapid electrification, to avoid future oil import bills. Trump’s proposal not only leaves American consumers behind, it also denies U.S. manufacturers an innovative home market within which they can develop, test, and scale their future fleet. 

Worse, Trump proposes to freeze innovation in 2021. Models for that year are already well into their design and production cycles. If the federal courts let him implement this freeze — Acting EPA Administrator Andrew Wheeler thinks the proposal is illegal — then Trump faces a prolonged legal wrangle over whether he has the right to strip California and its partner clean car states of their ability to protect their citizens. Whether Trump wins or loses these lawsuits, they will take years to be resolved.

During those years no one in the auto industry will know what kind of cars they will legally be able to sell in the United States. Will it be the innovative fleet required by the current, Obama-era standards, with a growing share of electric vehicles? Or will it instead be the technology laggards of a fleet whose emission and efficiency standards have been frozen (at an estimated cost to American drivers of $450 billion)?

The result may well be devastation of the U.S. auto industry, with a bifurcated market consisting of half innovative, half frozen. 

Can the U.S. auto industry survive three more years of regulatory and marketing paralysis? How can they simultaneously surmount bloated domestic costs for steel and aluminum, disrupted auto parts supply chains, and retaliatory tariffs in market after market as countries prove the president wrong when he boasts, “I’ll win these trade wars. Easy.” And if autos go down, can the rest of American manufacturing stay afloat?

I share the president’s stated goal — bring back the manufacturing economy which elsewhere serves as the foundation of a healthy middle class. But arrogance and ignorance are leading him to jump over a cliff, with American’s manufacturing future tied to reckless plunge. 

Carl Pope is the co-author of New York Times bestseller “Climate of Hope” and the former executive director and chairman of the Sierra Club.