On Thursday, President-elect Donald Trump held an event in Indiana to tout a deal he had just finalized with United Technologies, the parent company to air conditioning and heating giant Carrier.
The company had announced plans to move all of its Indiana production to Mexico starting next year, eliminating 2,100 American jobs. On the campaign trail, Trump had promised harsh retribution for such a move, pledging to levy a big tariff on its imports.
But that promise disappeared in the actual deal. United Technologies and Carrier will suffer no penalties, according to all reports on the deal, even though 1,300 jobs are still moving to Mexico. Instead, the company has been given a state economic incentive package worth $7 million over ten years and a promise from the Trump administration to lower the corporate tax rate and undo “most” business regulations, in Trump’s words.
Yet the day after his speech, prominent media outlets ran with headlines saying that Trump is threatening to crack down on companies that move production offshore. They focused on his threat of “consequences,” despite the deal he actually struck with Carrier that includes no such consequences and despite other parts of his speech where he promised benefits to companies that threaten to leave.
At the Washington Post, the headline focused on Trump promising vague “consequences” for companies that move production to other countries, while the body referenced his “determination to use a mixture of incentives and tariffs to keep jobs from going overseas,” despite the fact that no tariffs against United Technologies have been brought up in negotiations. The Wall Street Journal pointed to “penalties” in its headline and described Trump as using “a carrot-and-stick approach.” Both articles highlighted the parts of his speech that promised retribution, while leaving the parts of those sentences out where Trump promised to give them benefits.
Here’s what Trump really said on Thursday: “We’re not going to need so much flexibility with other companies, because we are going to have a situation where they’re going to know, number one, we’ll treat them well, and number two, there will be consequences.” Those consequences, he said, would be a heavy tax on their products made in other countries that they import to the U.S.
That, however, is not what is happening with Carrier. The company has only experienced the “treat them well” part of his pledge, extracting economic benefits from the administration.
Even the threat of calling into question United Technologies’ vast and lucrative contracts with the federal government was apparently off the table. Trump told the New York Times that he didn’t raise the issue with the company. “I never mentioned it. I didn’t feel I had to,” he said.
In the next breath of his speech on Thursday, Trump all but invited companies to threaten to move production in order to get their own package of incentives just as United Technologies has.
“We’re going to have a lot of phone calls made to companies when they say they’re thinking about leaving the country, because they’re not leaving this country,” he said, adding that companies can go “from state to state and negotiate good deals with different states, but leaving the country is going to be very, very difficult.”
This prospect has already worried economists: that by rewarding Carrier’s threat to move jobs with financial incentives, rather than with penalties, other companies will line up to ask for the same. The deal Trump struck with United Technologies benefits from the fact that Vice President-elect Mike Pence is governor of Indiana and can offer tax breaks, which may be harder with other states. Still, Trump goaded companies to try and extract similar concessions in other places.
Yet not so long ago, Trump himself was skeptical of these kinds of deals that offer benefits and no punishment.
“I’ve watched as politicians talked about stopping companies from leaving our states,” he said at a rally in Pennsylvania this summer. “‘Here’s a tax abatement of any kind you want. We’ll help your employees.’ It doesn’t work, folks. That’s not what they need. They have money. They want to go out, they want to move to another country, and because our politicians are so dumb, they want to sell their product to us and not have any retribution, not have any consequence.”
So far he isn’t listening to his own advice.