Donald Trump’s Response To Carrier Relocating To Mexico Is Economically Illiterate

One of the major components of Donald Trump’s “Make America Great Again” argument is that he will duplicate his business success for the country itself. He’s made billions and will help Americans make big money too. He’s done great deals for his own balance sheet and will do the same for the nation’s.

As many have pointed out, he’s not given much in the way of specifics. But he has left some breadcrumbs as to the types of policies he would likely attempt to put in place. And they are dreadful. Donald Trump is an economic illiterate.

These are excerpts from his rambling almost-incoherent campaign speech in Indiana, all of which have specifically to do with Carrier’s decision to move a manufacturing facility to Mexico:


The nonsense contained in these statements are only exceeded by the surety and confidence with which they were asserted.

In no particular order, here is what is wrong with what Trump had to say:

No president should be picking winners and losers.

The role of the president does NOT include being economic-dictator-in-chief. This has been a particular complaint about the current administration’s forays into the renewable energy business and its subsequent failures. No one wants a president going through the day’s Investors Business Daily to determine if independent business decisions meet his approval. Nor do we want businesses having to keep an eye on the Oval Office when considering potential investments and opportunities.

It would be impossible for one individual, even if advised by the very best people, to have sufficient information on the details at hand to know better than those in the business itself. Even if one did magically understand everything, the arrogance involved in commanding specific actions, when one has no direct stake in the company involved, is staggering in scope.

Furthermore, the potential for corruption and cronyism are rampant. The temptation presented by two competing companies, each having their own mutually-exclusive agendas, would be impossible for anyone to overlook. Access and being well-connected would be formidable currency in this type of game. Given that Trump has openly bragged of donating to both sides of the political aisle, “because that’s how business has done,” this is the type of game he’d be likely to encourage. And it’s disgusting.

35% import tax rates harm far more people than they help.

The stated goal of the punishment of Carrier is to force them to keep their manufacturing facility in Indiana, to accrue benefit to the state’s workers. But what guaranty is there that Carrier wouldn’t move elsewhere? Or abandon that segment of the business altogether? And what now of the thousands of individuals who will be confronted with higher-priced air-conditioning units? The assumption that Carrier would simply continue operations as they have been, with nothing changing, is naive and stupid.

Millions of Americans are shareholders in Carrier and they’ll be harmed by this.

Carrier is owned by United Technologies, a $56 billion dollar conglomerate. United Technologies, in turn, is partly owned by some of the largest banks and mutual funds on the planet:Trump screenshot
No big deal, right? The huge fat cats that are profiting by screwing Hoosiers out of jobs should get what’s coming to them, right?

Think again.

If you’ve got any sort of retirement or investment fund, chances are it includes something from Vanguard or Franklin. Also, any OTHER fund or investment you have might include shares of JP Morgan Chase, Bank of America, or Bank of New York (3 of the biggest banks on the planet). Even if you have a state-provided pension, the management of those funds might likely include a direct or indirect investment into one of these companies. In other words, you probably are a direct or indirect shareholder of Carrier and a decision to counter their business-improving and profit-seeking actions directly affects you.

How does that feel? Do you want your president hurting you or your family’s net worth for the benefit of currying votes via populist appeal?

I did a little homework, after this thought came to mind, and discovered that one of the smaller funds in my less-than-$1000-value IRA has a small position in United Technologies. Sure, it’s only a few dozen dollars worth of value, but it’s value. And that value is being threatened by a candidate who thinks he knows what’s the “right” decision.

The “bad trade deals” are actually private agreements mutually agreed upon by both sides.

Trump seems to imply that a trade deficit of $50 billion is money on the table that is stupidly being lost or that the U.S. government has one big contract with the country of Mexico. Either is absurd. What’s actually happening is that individuals or companies on both sides of the border are trading goods, money, and services, to benefit themselves.

Another way to look at it is to evaluate the trade deficit you currently have with your local grocery store. Odds are that they’re getting your money and all you’re left with is stuff that you have to cart home. They’re not giving you money nor are you delivering product to them. It’s a 100% deficit of trade, from your perspective. But you know this is a tainted view of it. The reality is that you freely chose to give your money in exchange for goods that you more-highly value.

Would you agree to some other person’s criticizing those “grocery trade imbalance” deals as poorly negotiated and needing outside help? Of course not. Yet this is exactly how he is characterizing trade with Mexico.

The way to improve job opportunities in Indiana, or anywhere else in the country for that matter, is to support a free-market system where individuals and companies are free to pursue whatever they deem is in their best interest.

Unfortunately, Trump either doesn’t understand this type of thinking, disagrees with it, or is cynically asserting economic nonsense with a populist flair to appeal to a specific few. Whatever the reason, it is idiotic and economically illiterate.

This was originally published on Independent Journal Reviewindependent-journal-opinion


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