What Goes Around…
Macy’s Is Laying Off 10,000. Is It Donald Trump’s Fault?
If he gets the credit for recent auto company announcements about keeping jobs here, then why doesn’t he also deserve the blame for retail layoffs?
What the lord tweeteth, the lord taketh away. No, that is not, strictly speaking, scripture. But the message very much applies to the soon-to-be primetime presidency of Donald Trump. Over the past weeks of the transition, Trump has proven adept at taking credit via tweet for a series of decisions by multinational companies to invest in factories and hiring in the United States, most recently the announcement by Fiat (which is part of Chrysler Motors) to invest $1 billion to modernize two of its auto plants in Michigan and Ohio. Trump tweeted “it’s finally happening,” and linked both that move and last week’s announcement by Ford to, as Trump described it in another tweet, “scrap Mexico plant, invest in Michigan due to Trump policies.”
It’s all fine and good to take credit for the winds blowing in the right direction. Trump may be unusually good at that game, but he would hardly be the first or last politician to do so. What’s intriguing is that by so closely aligning these decisions with his rhetoric of America First and his threats of potential tariffs, he is inadvertently creating a future liability: What will happen if and when the winds shift? Will Trump manage to bask in the glory of what goes right and avoid responsibility (or avoid being held responsible) for what does not?
It’s clear that for now, there have been a series of announcements by companies about investing and hiring in the United States that Trump has astutely taken credit for. It’s also clear that, even in the face of the fact that only one of those announcements—the one by much-maligned Carrier not to shutter its furnace plant in Indiana but instead maintain it and a few hundred jobs with millions in aid from the government—was actually a product of the election results in November. All of the others, from Ford to Fiat to Japan’s Softbank (which controls the telecom carrier Sprint) announcing more investment in America, had been in the works quite some time before the November election. As Mary Barra, CEO of General Motors, explained, decisions about where to build today were made “two, three, four years ago.”
That means that Trump was not the primary determinant of these decisions, though his election and concern about future friction were certainly factors in whatever boardroom discussions took place in these companies. The CEO of Ford, Mark Fields, explained to CNBC last week that Trump was by no means the main reason for canceling plans for a $1.6 billion small-car plant in Mexico. “The bottom line is that we’re not seeing the volume and demand that we expected for that plant,” Fields said. Ford then looked at existing plants in the U.S. and concluded that demand for small cars was less than expected and could therefore be met by existing facilities in Michigan. That said, Fields did acknowledge that the prospect of a more pro-growth environment under Trump was seen by Ford as a positive for manufacturing domestically.
In a related vein, the decision of Japan’s Softbank to invest up to $50 billion in the United States, much touted by Trump tweets after Trump met with Softbank head Masayoshi Son at Trump Tower in early December, had actually been announced a month before the election. Trump took credit for the decision; the Softbank CEO did not contradict him; and that became yet another piece of tweeted evidence that Trump’s policy of cajoling and strong-arming companies to invest in America was paying off.
Why didn’t any of these companies state the facts more loudly? The answer is rather simple: What would be the point? If you are Ford, Fiat, or Softbank, and the president-elect tweets out praising your investment and growth plans and then takes some credit, that makes him look better, yes, but it also makes your company look better. Why bother getting into a spat with a new administration over the timing and why bother denying Trump some credit, however tenuous that credit may be? Companies gain from letting Trump bask in the glory, and would gain nothing by rebutting him.
Trump’s style is in marked contrast to Obama. Obama, much like say George H.W. Bush, found the idea of constantly touting his achievements somewhat crass. So he didn’t. And in a world that appears to reward those who consistently remind others of what they have done, not aggressively taking credit for things going well can be a liability. It is not one that Trump will likely suffer.
But what happens when factories close and stores shutter? Last week, Macy’s announced layoffs of up to 10,000 people and the closing of multiple stores. Sears and Kmart did the same; Kohl’s announced dismal sales; and The Limited abruptly shut all of its retail outlets across the country. Trump supporters actually took to Twitter to take credit for Macy’s plight. Macy’s last year dumped Trump’s clothing line, and in response, some Trump supporters boycotted Macy’s. They then connected those dots to suggest that Macy’s tanked because it took on Trump.
Trump himself, however, was notably silent about these retail closures. Whatever he gains from trumpeting the moves by auto companies, he gains zero by drawing attention to attrition in the retail sector that trade and tariff policies cannot and will not fix. Sure, he could conceivably attack Amazon for the hollowing-out of retail, but that would only serve to pit American companies against each other without doing an iota to generate sales and employment.
No matter how good Trump is in marketing himself, the presidency is not likely to function the way his previous ventures have. JFK once famously said in the wake of the Bay of Pigs fiasco that victory has a hundred fathers and defeat is an orphan. Trump has managed to invert that formula in his business career, and surely many who support him will give him a considerable benefit of the doubt before holding him responsible for job losses just as they now grant him credit for job gains.
Outside of that core support, he will own those problems eventually. Not in the first year, where he like all incoming presidents can effectively pawn off issues on his predecessor, but that wears thin.
If he is as lucky as he has been, the economy he has inherited will be a wage-growth and job-growth engine, as it has been the past year. We will receive a torrent of triumphant tweets. Structurally, that will not be the whole story. A Trump administration cannot reverse the chaos in the labor market unleashed by technology even if it succeeds in halting some globalization. Even if these trends are ultimately conducive to greater prosperity and increased living standards for most, in the near term, no one has figured out how to address those changes effectively. Tweets only go so far. At some point in the next four years, 140 characters of success will strike exactly the wrong note as millions lose jobs to efficiencies and automation even as millions more find engaging careers in thriving areas of the country. Live by the tweet; die by the tweet.