Industrial Policy by Tweet

Robert D. Atkinson March 6, 2017
March 6, 2017

Among the most controversial uses that President Donald Trump has found for the bully pulpit, at least in the eyes of free-market advocates and believers in Washington’s pro-trade consensus, has been to hector individual companies into keeping jobs in the United States, writes Rob Atkinson in National Review. Indeed, in what appears to be a wholesale rejection of the economic principle of “comparative advantage,” which holds that countries should specialize in whatever they’re best at and not worry about the rest, President Trump insists that companies must use U.S. labor if they want to sell their products to U.S. customers. As with much else he has done, the president has telegraphed his policy intentions on Twitter, as when he trumpeted, “I want new plants to be built here for cars sold here!” And woe betide any company that announces plans to build a factory outside the U.S., for retribution on Twitter will be swift, as Toyota found out when Trump tweeted, “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.” Ford evidently heard that message loud and clear, and in response Trump tweeted, “Thank you to Ford for scrapping a new plant in Mexico and creating 700 new jobs in the U.S. This is just the beginning — much more to follow.” All of which raises the question: Does Trump’s industrial activism herald a new kind of economic patriotism (albeit forced) that will be good for the economy, or is it instead a kind of banana-republic manipulation that will lead to misallocation of resources, a lower standard of living for Americans, and less globally competitive U.S. companies?