Donald Trump was sending a message that he intended to follow through on pledges to impose stiff tariffs on imports from companies that move production overseas and ship their products back to the United States.
INDIANAPOLIS — The long-promised call from Donald Trump to the heating and cooling giant Carrier came about a week after the election.
The president-elect warned Gregory Hayes, chief executive of Carrier’s parent, United Technologies, that he had to find a way to save a substantial share of the jobs it had vowed to move to Mexico, or he would face the wrath of the incoming administration.
On Thursday, as he toured the Indianapolis factory floor to take credit for saving roughly half the 2,000 jobs Indiana stood to lose, Trump sent a message that he intended to follow through on his pledges to impose stiff tariffs on imports from companies that move production overseas and ship their products back to the United States.
“This is the way it’s going to be,” Trump said in an interview with The New York Times. “Corporate America is going to have to understand that we have to take care of our workers also.”
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Trump was accompanied by his vice president-elect, Mike Pence, who is Indiana’s governor. Pence was there when the president-elect placed his call to Hayes, and Pence sealed the deal with the United Technologies chief executive with a handshake on Monday.
“I don’t want them moving out of the country without consequences,” Trump said in the interview. He said he was not concerned if that warning angered free-market-oriented Republicans on Capitol Hill.
“The free market has been sorting it out and America’s been losing,” Pence added, as Trump interjected, “Every time, every time.”
Since the pact was disclosed Tuesday, critics have pounced on Carrier’s receipt of $7 million in incentives from the state of Indiana, the kind of corporate giveaways Trump knocked as he slammed Carrier on the campaign trail last spring.
Others have pointed out that cutting individual deals with different companies is a costly and ineffective way to stem the powerful forces that impel business to move factories and jobs in a highly competitive global and national economy.
“He has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives,” Sen. Bernie Sanders, I-Vt., wrote in an Op-Ed on Thursday for The Washington Post.
Trump’s appeal is likely to lead to a more fundamental shift in the way Washington approaches dealing with corporate decisions on where to locate jobs.
“Contrary to early reactions from the left and the right, the Carrier deal opens the door to a new approach to U.S. economic growth policy that is sorely needed,” the Information Technology and Innovation Foundation, a research and advocacy group, said in a statement. “It sets the precedent that growing, attracting and retaining globally traded, innovation-based industries that are both high-value and pay high wages is central to U.S. economic growth.”
Despite the cheers Trump received as he walked around the factory floor, where the lines continued to run, another 1,000 workers for the company in Indiana will be losing their jobs.
This includes 700 at a United Technologies factory in nearby Huntington and several hundred in Indianapolis. The jobs that are being preserved are mostly on the lines that build medium- and high-efficiency gas furnaces.
Not long after Trump and Pence left for the airport and to another rally in Ohio to celebrate his victory, workers coming in for the night shift received a letter titled “Company Update on Indianapolis Operations.”
“While this announcement is good news for many, we recognize it is not good news for everyone,” the letter stated. “We are moving forward with previously announced plans to relocate the fan coil manufacturing lines, with the expected completion by the end of 2017.”
United Technologies, Carrier’s parent, saw the writing on the wall as soon as Trump declared victory last month. The offer to preserve jobs, even at the cost of some of the $65 million savings the company expected from the move, could serve its larger corporate interests.
“Every penny counts, but if we step back and I’m looking at earnings of $6.60 per share this year, 2 cents is an easy concession if the president-elect listens to some of the company’s bigger concerns,” said Howard Rubel, a senior equity analyst with Jefferies, an investment banking firm in New York.
And Trump and Pence, while providing a carrot through the state incentives and promises of future business tax cuts, held an implicit stick: the threat of pulling federal contracts from United Technologies.
Trump and his team were well aware that the amount UT stood to lose in those contracts dwarfed the savings from moving some of its operations to Monterrey, Mexico, from Indiana.
Despite accomplishing only half of what had been promised in the campaign, Trump and Pence predicted that the number of jobs ultimately preserved could rise as Carrier follows through on its promise to invest more than $16 million in the state.
That provision plus the incentives were worked out between Carrier and officials from Indiana’s economic development office, with Pence overseeing the process.
The vice president-elect insisted the incentives did not represent a giveaway on Trump’s part, and claimed United Technologies had turned down a similar-size package of breaks in March. What made the difference, he said, was Trump’s public pressure, as well his promise to cut corporate taxes and ease regulation.
Trump, too, played down the role of the incentives. And he said he did not directly raise the $5 billion to $6 billion in federal contracts United Technologies receives, much of it from the Pentagon.
But company officials are acutely aware its Pratt & Whitney unit, among other things, supplies jet engines to the Air Force’s most advanced fighter and many other planes, making it much more vulnerable to political pressure than other, lesser-known manufacturers that have been closing shop in the Midwest and moving production south of the border.
“It may have a played a role in their equation,” Trump allowed. “I never mentioned it. I didn’t feel I had to.”
What about the fact that Trump frequently sourced products for his properties overseas? Will he lead by example and buy more goods made in the USA?
“I buy thousands and thousands of TVs,” he said.
“I would like to, but they essentially don’t make them in the U.S. You know the hats I do? It took us forever to find a company that can make a hat in the U.S.”