The ongoing trade war between the U.S. and China is weighing heavily on many U.S companies as well as consumers. Already, interest rate on homes and several stocks have increased above what economic experts believe the U.S. economy can handle at this time.
Economic activity is slowing down as high tariffs remain on billions of imported Chinese products. The U.S. and China have been playing a tit-for-tat tariff raising game since earlier this year and the effects of the high tariffs on industry are becoming apparent.
On Monday, General Motors disclosed its reasons for closing several plants which will cut 14,000 jobs. During their announcement, General Motors hinted at the ongoing trade issues as a key reason among other factors for the company’s decision.
The company also stated earlier in the year that the high tariffs would have a negative impact on jobs, and as the year comes to a close this seems to be the case.
The company is halting production at plants in Ohio, Michigan, and Maryland as well as in Canada. President Trump tweeted that he is considering halting government subsidies to GM as well as other companies that eliminate jobs in the U.S.
It is unclear, however, how much impact the government subsidies have for GM and other U.S. companies being hit by the high tariffs on what power or influence Trump has in regards to government subsidies for businesses.
President Trump is particularly upset about the closing of the Lordstown, Ohio plant given the importance of the state during elections. Trump promised to help develope jobs in that area during his campaigning, and Ohio in turn voted for Trump in the 2016 Presidential Election.
General Motors did not specifically cite the high tariffs or trade disputes of China and the U.S. as the reasons for closing the plants, but did say the “changing market conditions and customer preferences” among the main reasons for their decision.
This heavy implication towards the important tariffs indicate that the company is being impacted by the increase in costs of imported materials, notably the rising cost of steel. The company most likely decided to move production to an area where prices were lower, such as China or Mexico.
GM is considering moving some employees to other factories in the U.S., but is unsure of how many jobs can be transferred.
Economic experts predict that other automobile manufacturing companies many follow GM and begin cutting production jobs/efforts at U.S. factories due to high tariffs on needed materials. Ford and Tesla are among companies that are expected to make cuts.
The G20 Summit is scheduled to take place later this week where President Trump and Chinese Premier Xi are anticipated to meet and hopefully put an end to the ongoing trade disagreements and hopefully make an agreement that will lower trade tariffs before any more U.S companies have to close plants and cut jobs to offset the costs of material imports.
The decisions of GM could be reflective of worse economic conditions to come in lower tariffs and trade agreements are not decided soon. American companies may continue being squeezed by high important costs, resulting in devastation for American workers, something President Trump campaigned to prevent in 2016.
The Trump Administration will have to work diligently with CEO’s and Chinese officials if they want to hold onto their promises to American workers.
