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Editorial: Trump intervention in businesses benefits no one

Ford Motor Co. has scrapped plans to build a new factory in Mexico. The U.S. automobile giant may have made the decision in response to U.S. President-elect Donald Trump’s criticism of American companies for shifting their production units out of the country.

 

Ford had planned to spend approximately 180 billion yen on the construction of a new plant in Mexico to produce smaller vehicles. However, Trump, who had pledged during his election campaign to bring back jobs to the United States, repeatedly criticized Ford’s move.

 

Ford President and CEO Mark Fields denied that the company bowed to Trump’s criticism, citing a decline in demand as the main reason for cancelling its plan. However, observations are prevalent that the president-elect’s comments pressured Ford to make the latest decision.

 

What is worrisome is that Trump could continue to intervene in individual companies’ decisions on the locations of their production units and other business affairs. Trump also tweeted to urge General Motors Co. to continue producing cars in the United States.

 

Trump’s move could affect Japanese manufacturers’ moves to invest in Mexico in a bid to build a production base for exports to the United States.

Virtual interventions by an administration will not benefit anyone.

 

Why does Ford need to produce automobiles in Mexico in the first place? The costs of hiring American workers who belong to a labor union representing the U.S. automobile industry are reportedly several times higher than those of hiring Mexican workers. If American automakers were to continue producing cars in the United States in response to political requests, these businesses would be forced to either pass higher labor costs on to retail prices, slash their workforces by further automating their production or cut wages for workers.

 

Increases in retail prices would affect consumers and benefit rivals. If U.S. car manufacturers were to maintain their workforces and current retail prices, it would adversely affect the firms’ financial conditions, causing their share prices to fall and eventually forcing them to review their management policies.

 

If that were to happen, Trump would be unable to protect the benefits of workers as he had promised. In fact, though Ford canceled its plan to build a new plant in Mexico, it still intends to shift production of its smaller vehicles from its domestic factories to existing manufacturing units there. If Trump were to levy high tariffs on imports from Mexico, it would hurt U.S. consumers, particularly the middle class and low-income earners.

 

If Trump is criticizing companies for producing goods overseas because the practices hurt domestic employment, why doesn’t Trump call into question companies’ moves to cut back on their workforces to streamline their operations?

 

Trump’s policies lack detailed discussions, rules and principles. Companies cannot make rational business decisions free from anxiety if the decisions made after careful consideration have to be scrapped all because of a tweet by the president.

 

If Trump continues such a practice, he cannot “make America great again.”

 

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