Employers that Export Jobs Face Uncertainty

Trump’s threat to impose tariffs could complicate workforce planning

By Steve Bates Dec 12, 2016

President-elect Donald Trump's threat to impose steep tariffs on U.S. companies planning to move jobs abroad could have a chilling effect on those intentions. But it's not clear if the president has the power to sanction individual organizations for exporting jobs, if such penalties would be supported by Congress or if the courts would uphold those penalties.

Saving U.S. jobs and returning jobs previously moved abroad—along with tax breaks and reduced regulations for businesses—were key rallying cries of Trump's presidential campaign. Since his November victory, he has reinforced those priorities by negotiating a deal under which air conditioning manufacturer Carrier will keep hundreds of jobs at its Indianapolis plant instead of moving them to Mexico. And he has threatened sanctions against at least one other company.

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The agreement with Carrier involved state tax incentives of about $7 million. However, other companies may not get such perks for keeping jobs stateside: A Trump tweet targeting Milwaukee-based manufacturer Rexnord Corp. indicated only that the company would face a tariff of 35 percent on goods that it makes abroad and sells in the U.S. if it goes forward with its plan to move about 300 jobs to Mexico. Rexnord did not respond to SHRM Online's request for comment.

In the past, the debate about imposing tariffs on foreign goods sold in the U.S. has focused on the countries exporting the goods—not the companies selling them. Some federal laws give the president broad authority over commerce under certain conditions, according to a September report, Assessing Trade Agendas in the U.S. Presidential Campaign, from the Peterson Institute for International Economics. The report points out that the Trading with the Enemy Act of 1917, the Trade Expansion Act of 1962, and the International Emergency Economic Powers Act of 1977 are among measures that give the president wide discretion to impose tariffs or freeze foreign-owned assets for national security purposes during a war or in an emergency situation.

Robert E. Scott, a senior economist with the Economic Policy Institute, said in an e-mail that he "would be surprised if those powers would extend so far as to single out specific U.S. companies or even a whole class of companies (outsourcers) and impose tariffs on their imports."

Still, any company targeted in a Trump tweet for a potential financial penalty might take a second look at its plans and consider negotiating with the president-elect or the government to avoid sanctions. Just the prospect of the negative publicity associated with being singled out by Trump might make companies reassess any plans to move jobs abroad. In addition to business plans, recruiting and employee engagement could be impacted.

[SHRM members-only toolkit: Practicing Workforce Planning]

On the other hand, the odds of any given company being named in a tweet by the president-elect are fairly low. Organizations might take their chances, given the financial stakes tied up in their plans to invest abroad. Or they might try to follow the Carrier model and hold out for a rich package of government incentives before making any change to their staffing strategy.

"It's not like the president is going to pick out company after company after company" for public threats of tariffs, said Claude Barfield, Ph.D., resident scholar at the American Enterprise Institute. "He probably will try to make an example" out of a few firms. "A large company likely would be a symbolic target. It's not likely that a small company in Michigan or in Colorado is going to be singled out," he said. "It's impossible to intervene on a company-by-company basis. The decision that Carrier made [to move jobs abroad] is made by thousands of companies every day."

Even if Trump imposes tariffs on individual companies, the firms would have recourse. "It's pretty clear that the courts would stop the president," said Barfield. There is no existing executive authority that would allow the president to apply company-specific tariffs, according to experts.

Also, Congress might balk at giving Trump the powers he seeks. House of Representatives Speaker Paul Ryan (R-Wisc.) and Majority Leader Kevin McCarthy (R-Calif.) have expressed concerns about imposing tariffs on individual companies.

The U.S. Chamber of Commerce, the Club for Growth and some other conservative organizations generally oppose tariffs and government intervention in the workings of businesses. They note the potential for retaliatory tariffs from other countries and the resulting damage to the U.S. economy, including higher prices for U.S. consumers.

Gerry Crispin, principal and co-founder of recruiting firm CareerXroads, said that because of Trump's threats, "Companies will hedge their bets. They're going to be cautious and careful in expanding either externally or internally. There's going to be a lot of uncertainty."

Crispin noted that many U.S.-based companies are multinational. When there is demand or opportunity for those firms to expand or bring their products or services to other countries, jobs will be added or shifted there. "Most multinationals are expanding externally to the U.S. It's not just a matter of exporting jobs from the U.S.," he said.

He stated that an increasing number of U.S. citizens are willing to work in other countries long-term, giving companies another reason to consider shifting jobs.

Steve Bates is a freelance writer in the Washington, D.C., area.

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