Trump Wants More Factory Jobs. Panelists Say His Actions Are Counterproductive

Ryan Modlin, head of North American government affairs for the aluminum giant, with 22 plants in the U.S., said the question shows a lack of understanding on how to fulfill Trump's America First agenda. He and other panelists were discussing the America First trade agenda at Georgetown Law School's annual trade update.

"It’s not going to happen," he said.

Norsk Hydro, headquartered in Norway, is the largest extrusion company in the U.S., and makes auto parts, heavy truck parts, items used in construction, and consumer products.

"We don't make a lot of primary metal in the United States," he said, and the reason is not environmental standards or labor costs. About 85% of the primary aluminum the U.S. consumes is from Canada, which has similar labor and environmental standards, but much cheaper and plentiful hydroelectric power.

"Without affordable, reliable energy, you don’t have an aluminum plant," Modlin said, and data centers are much more lucrative contracts for utilities than aluminum smelters.

Nicole Bivens Collinson, leader of Sandler Travis' trade and government relations practice, told a different story of why Trump's approach in his second term is not going to lead to a boom in manufacturing jobs, as he predicts.

She said her firm has a client who had been manufacturing in China, and when Section 301 tariffs were imposed during Trump's first term, he decided to reshore production to Pennsylvania. While assembly was now in America, he still needed to import inputs from Mexico, Vietnam and China.

With the 25% tariffs on Mexico, at least 20% tariffs on Chinese inputs, and who knows what kind of tariffs coming on Vietnamese imports, this client is changing nothing about his production process.

"I thought the message was to get out of China -- I got out of China," she said, describing his tariff fatigue.

She said clients who once believed it could be worth it to move manufacturing to another country with more expensive labor and logistics at a time when Chinese products were tariffed, and the other countries weren't, now believe it's cheaper to stay in China and pay the duties.

Steven Vaughn, former general counsel under U.S. Trade Representative Robert Lighthizer, was the panelist there to defend the strategy. Moderator Viji Rangaswami asked him what Trump was trying to accomplish with all the tariffs.

He said that two-thirds of American workers have a high school education, and those working-class people, in the current economic system, "are really, really struggling."

According to government data, about half in the workforce are either high school dropouts, have a high school diploma, or went to college and didn't finish. Another 10% either have a white-collar two-year degree or an occupational two-year degree.

He said that Trump believes that if you lower taxes and regulations, and impose tariffs, it will pressure companies to hire more American workers than they would otherwise, and pay more wages than they would otherwise.

He said that real median household income was flat for a long time, but rose from $71,000 to $81,000 during Trump's first term.

"They think they do have a system that works, they ran on it, and they’re going to try," he said.

Modlin said Trump did run on a better economy, and his voters in suburban Detroit and Elkhart County, Indiana, are prepared to wait and see how it turns out.

But he said the threats coming from Trump, such as saying there would be a 50% tariff on Canadian metals the next day, are not something businesses take in stride.

"That’s not a way to run a $30 trillion economy! That scares investment," he said.

He said aluminum producers are also wary about whether Trump will drop tariffs on Russian aluminum, a major producer.

Modlin said that his company has major operations in Indiana, and talks often to Sen. Todd Young, a Republican representing that state. "He’s as frustrated as we are," he said, because he doesn't believe the White House has a clear goal on reshoring that all the policy is working toward. Still, he said, "Congress will wait and see."

But Modlin predicted if Ford or GM have to stop producing trucks because of tariffs on Mexico and Canada, "that’s going to turn around really quickly."

Modlin said that China is producing more aluminum made from aluminum products that have become scrap, a more economical way of making the metal than primary smelting. "They’re getting almost 2 million tons of scrap and material from the U.S. every year," he said.

And that's not even considering how many aluminum cans are tossed in the trash instead of becoming a valuable input.

"We landfill more metal than we produce. That’s scary," he said. He said the last time the U.S. had a national recycling policy was during World War II. He thinks the government should help recyclers improve their automation, so their separation is more effective, and the highest quality scrap should have export restrictions.

"If I can go and say I am going to build secondary aluminum-producing factories that will consume and capture the stuff that we [export] limit, that’s an industrial policy everyone could get behind," he said. He said the EU is also considering such a policy, as they, too, export aluminum that their producers could be using.

With a smarter recycling policy, there would be less need to import primary aluminum from Canada, he said.