Wednesday, August 28, 2019

Can tariffs save Foxconn? Or should we even bother at this point?

We got further confirmation today that the Trump trade wars with China aren't going away any time soon.
The U.S. Trade Representative’s office on Wednesday reaffirmed President Donald Trump’s plans to impose an additional 5% tariff on a $300 billion list of Chinese imports starting on Sept. 1 and Dec. 15.

The USTR will impose a 15% tariff on some of the targeted goods from Sept. 1, with the rest, including cell phones and laptop computers, to get a 15% tariff on Dec. 15, the agency said in a Federal Register notice. The Trump administration had previously planned to impose a 10% tariff on these imports.

Trump announced the tariff increase last Friday on Twitter, in response to Chinese retaliatory tariffs on $75 billion worth of U.S. goods, including crude oil.

The Federal Register notice, however, did not mention Trump’s announcement of his intention to increase the duty to 30% on a $250 billion list of Chinese imports on Oct. 1 that have already been hit with a 25% tariff. USTR has previously said it planned to conduct a public comment period on that increase.
That reality prompted Wisconsin Public Radio to ask an interesting question.
Might Trump's trade war help encourage Foxconn to build in Wisconsin?

More than jobs behind this deal?
Foxconn makes more than half of its money by manufacturing Apple products in China. Because of the tariffs, the company will continue to look for ways to manufacture more products domestically, said Erik Johnson, a professor of economics at Carthage College.

"I think that fit very well into the idea with the trade war of wanting to produce a lot more in the U.S.," Johnson said. "In a very narrow sense, this could be good news for the plant."…

But Johnson emphasized tariffs will hurt Foxconn overall.

"Many of their goods are still imported from China and subject to tariffs," Johnson said. "Most of the iPhones are not assembled in the U.S. and tariffs are involved somewhere in the middle."
That last part seems important, as the Racine County plant is likely to be an assembly plant, so that won’t avoid tariffs.

There is a part in the WPR article that quotes a Foxconn executive that says they might produce "servers, networking products and automotive central controls" in Wisconsin. But there have been a lot of plans for that Foxconn site over the last 2 years, so forgive me if I'll wait and see on that.

And a prominent Fox Valley Democrat has been actively calling on the state to pull the plug on the Foxconn project, and instead help preserve companies that are already operating in Wisconsin.
Outagamie County Executive Thomas Nelson tells NBC 26 he was skeptical of the deal. He says he believes the money and resources going into Foxconn would be better used on homegrown industries and jobs like the pulp and paper industry. He says he feels there have been a lot of promises and not a lot of product.

"We don't even have to spend $3.5 billion,” said Nelson. “I mean, we could spend a very, very small percentage and to help industries like pulp and paper, that have been struggling but have been showing a lot of signs of resilience, that have a great track record."…

He talked about Appleton Coated, saying without much of any state support and very little attention, the company got back on their feet by themselves.

"These are really good example of why we should continue to support and invest in Wisconsin manufacturing, including and especially pulp and paper," said Nelson.
To jump off of that point by County Exec Nelson - even without the jobs incentives, there has already been a lot of money plowed into the Foxconn-sin region. This includes hundreds of millions of dollars in upgraded highways and in making We Energies rate payers shell out another $117 million to pay for new electrical lines and a substation that was intended to power a much larger Foxconn facility that we are going to get (if we get anything at all).

Which again begs the question - "Why did we give away so much to Foxconn compared to any other business?" Especially when Foxconn very well may have needed to locate in America anyway, either as a hedge against trade measures that President Trump might have put up, or as a PR move to entice Trump to exempt the company from to those tariffs (as Trump has done for several companies already).

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