Recent confusion between president elect, Donald Trump, and chairman
of Ford, Bill Ford made it sound as if Ford was moving a plant from
Kentucky to Mexico to specialize the plant in Kentucky and hopefully
increase overall production due to a greater productivity factor.
However, after looking a little deeper this decision was reversed, not
by persuasion of Trump. Trump threatened to impose a 35% tax on cars
imported from Mexico in criticism of Ford possibly moving production of
small cars to Mexico claiming the impacts on the US job market would be
devastating.
Ford came back to say that their plants are
currently working at full capacity estimating that they produce between
200,000 to 250,000 cars per year and that by moving production of
smaller or more luxurious (slower selling with lower profit margin) cars
out of the country where labor is cheaper would not affect US jobs at
all. Bill Ford's argument is that US factories would move to producing a
higher volume of more expensive and better selling cars such as their
trucks and SUVs. He goes on to argue that this would in fact benefit the
US economy because of the higher GDP from production of more expensive
goods. This offset should not impact US jobs, but what is the real
affect?
http://www.nytimes.com/2016/11/19/business/ford-move-cited-as-victory-by-trump-has-no-effect-on-us-jobs.html?ref=economy&_r=0
A high tariff on imported Mexican goods might raise the overall price in the market. We could see an increase in domestic manufacturing if more companies can produce here and sell at the new price.
ReplyDeleteOutsourcing means more profit. Firms do this because producing in other country is cost effective. I agree with Matt is if the US decreases domestic cost to manufacture less companies will outsource.
ReplyDeleteAs stated above, a tax on imported vehicles from Mexico would raise the price of the good, increasing domestic manufacturing. Wouldn't there be an increase in jobs created due to this new domestic manufacturing?
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