The Trump Effect on Offshoring

The Trump Effect on Offshoring

Trump is completely against offshoring

Throughout his campaigns, Donald Trump made it clear that one of his priorities if elected would be to return home jobs that had been outsourced to other nations by U.S. companies. The way most analysts see it, this is actually one of the main reasons some people voted for him.

Just days after he was elected, we went on to reiterate his desire to bring back home all American jobs. In one press conference, he openly stated that there would be ‘consequences’ for any companies that tried to move their operations overseas during his tenure.

And you can tell that he isn’t just talking – he is ready to walk the talk. Even before he was sworn in as president, he convinced an Indianapolis heating and air conditioning company – Carrier – to reverse its plans to close a furnace plant in the state and move to Mexico. That decision alone helped to keep more than 1,100 jobs in Indianapolis. According to a person familiar with Carrier’s negotiations, 800 of those jobs were manufacturing positions that were scheduled to be outsourced south of the border.

But Trump convinced the company to stay in the state. Under the new agreement, Carrier will receive a tax incentive package believed to be in the region of $7 million from the state of Indiana in exchange for making a $16 million investment in the state.

It’s just the start

That probably gives us a clue of where the Trump administration could be headed. It appears as though in the future, offshoring won’t be something you just wake up and get into; at least not for American companies. Otherwise you may find yourself battling the president himself.

The president who was sworn into office in January 2017 has since also said that he knows what to do to keep American companies from outsourcing jobs across borders. His first strategy, according to a press statement he delivered in late December is to ‘lower corporate taxes and reduce regulations.’

He also plans on introducing a high border tax on imported goods such that goods made outside the US even by US owned companies) will pay a high price to bring their products back into the country. Perhaps that’s what he meant by “consequences.”

This could be a big deterrent for companies that plan on taking production jobs outside the USA. If the border taxes are increased to the levels the president is insinuating, then most manufacturers may reconsider their plans and (like Carrier) just continue with productions at home. Why… because the new taxes will eat up any potential profits made through offshoring.   

It’s a game of wait and see

Ultimately, it will be a waiting game. Though the president has been tough talking and looking ready to deliver on the no-offshore jobs promise, a few experts are reluctant to buy into his arrogance and believe that it may actually come to nothing more than threats.

Those who are of this opinion base their arguments on the fact that Trump himself – even from back in the day – has been a very reactive person. He mostly acts based on what’s going on around him. In fact, he himself admitted that the only reason he got involved in the Carrier issue is because he watched a few employee protests on TV. He says that he saw the employees complaining, picked up the phone and called the Carrier CEO.

The question is; how many more companies can he call to stop them from offshoring jobs? He can’t suddenly stop everyone from doing it. If he chooses to pass legislations to stop the trend, that would take some time, more likely a few years.

Recently, he was quoted saying that he plans on personally calling other companies that are contemplating moving operations outside the USA. Let’s give him the benefit of doubt. In other words, let’s be prepared for the worst. If he manages to stop offshoring altogether, let’s be prepared for that. But it’s not certain that it will happen.

Simply put;

  • Trump has openly said that he doesn’t fancy offshoring of jobs
  • He already stopped Carrier from moving to Mexico
  • But there are doubts as to whether he can stop everyone from outsourcing a few tasks offshore