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This week in Trumponomics: An ugly collision with General Motors

Rick Newman
Senior Columnist

President Trump is incensed at General Motors—again. After the company announced it would close five factories, kill several underperforming models and lay off 15,000 workers, Trump threatened to end federal subsidies for the company, along with other unspecified punishments. He also said the layoffs support his plan to slap a 25% tariff on all imported cars.

Trump’s logic is fishy. Making car imports 25% more expensive would be a huge price hike for consumers, who probably wouldn’t pay the new tax. They’d buy used models instead, or do without. One study found that such a tariff would hike the average price of a car by a whopping $4,400. Another study found such tariffs would cut auto production and kill at least 200,000 jobs.

But more objectionable than Trump’s logic is his habit of singling out individual companies for punishment when they do something he doesn’t like. The United States doesn’t have a command economy controlled by Washington (thank god) and politicians should never be involved in business decisions. If they did, we’d have bloated, inefficient companies that employ people in make-work jobs and can’t compete globally.

For these reason’s, this week’s Trump-o-meter reads WEAK, our third-lowest rating.

Source: Yahoo Finance

This week’s Trump-o-meter reading is controversial. Yahoo Finance’s Myles Udland argues that the grade ought to be SAD!, our lowest, as viewers can see in the video above. Myles feels political interference in business decisions is a capital offense that should earn the lowest possible marks. He’s not wrong. The argument for a slightly better grade is that Trump was probably just bloviating and won’t take any actual action against GM. If he does, that would be an overt abuse of power that would easily earn a SAD!

GM had to guess Trump might react the way he did. Trump went after GM in early January of 2017, before he had even been sworn in, when he attacked GM for importing some models of the Cruze compact car from Mexico. GM announced some fresh investments in U.S. factories, which seemed to placate Trump. But since then Trump has routinely attacked companies that move work overseas or do other things that displease him, including Ford, Amazon, Google, Facebook, Harley-Davidson and of course CNN.

Nobody likes layoffs, but they’re necessary for companies to modernize and remain competitive. If Trump really cared about laid-off workers in Ohio or Michigan, he’d demand job retraining and placement programs to help workers upgrade their skills and land new jobs that are more stable and perhaps even better-paying in an information-age economy.

One suspects politics play a role in Trump’s caterwauling: GM is closing factories in Maryland, Ohio and Michigan, which account for 44 electoral votes. Wins in Midwestern states, including Michigan and Ohio, put Trump over the top in the 2016 election, and he’ll need them again in 2020, assuming he runs for reelection. Republicans lost ground in the Midwest in this year’s midterms, so Trump may be particularly sensitive to job losses in those states under his watch.

GM says the money saved from closing plants that build cars people aren’t buying will go into new technologies, including electrification and autonomous driving. Trump should applaud companies making big bets on the future. And officials in states losing old plants should be pressing hard for a piece of that action. They might even ask Trump if he can help.

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Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman