The Tariff Trade Off: Jobs vs. Higher Prices

0:04Rick Farmer works in Newberry, South Carolina, as the county's economic development officer. So tell us about Newberry. Sure. First of all, it's a great little community. The city's motto is the city of friendly folks. It is, in a lot of ways, it's similar to other small South Carolina towns, or small cities, actually. Population's about 10 ,000. Are there grumpy folks in Newberry? Oh, sure. They're everywhere. Back in 2016, Rick got some bad news. I remember it like it was yesterday. April of 2016, I got a phone call. Hey, Rick, did you hear the news? And the news was our local Caterpillar plant was closing.

0:54Caterpillar, the iconic American manufacturer of construction equipment. It was leaving its factory in Newberry, and that meant losing over 300 jobs. When you first heard that news that they were moving out, how would you describe it? Well, I knew there would be a lot of concern because, again, it was our number one brand. It was the most recognized brand that was here in Newberry County. They were some of the best jobs in the community. And I remember standing on the floor of Community Hall explaining to the Rotary Club why this is not the end of the world. But at the same time, I just wondered how much of that I really believed and how much of that I was just trying to keep folks from panicking.

1:42But Newberry was about to get an assist from a presidential hopeful who was promising to revitalize American manufacturing. I am going to bring back our jobs to Ohio and Pennsylvania and New York and Michigan and all of America. And I am not going to let companies move to other countries. Donald Trump. His main tool to bring those jobs back was tariffs. And for Newbery, that would bring in a new employer and chart a new path to growth. This is the playbook that Trump is now trying to replicate today on a much larger scale. But Newbery's good fortune came at a cost. Welcome to The Journal, our show about money, business, and power.

2:41I'm Kate Leinbaugh. It's Tuesday, April 8th.

2:48Coming up on this show, one town that benefited from Trump's tariffs and what it meant for everyone else.

3:10Our colleague Chow Deng covers the economy and has been following Trump's tariff plans. What is his policy goal with these tariffs? Okay, so there are a whole bunch. His administration says that tariffs can raise revenue for the U.S. They can protect American businesses. They can move manufacturing back to the U.S. They can create jobs for American workers. Do you have a sense of what he's envisioning? I mean, he has talked about the U.S. manufacturing glory days. So by that, he's essentially pointing to, you know, decades back when we had these American towns that revolved around like, you know, a single factory.

3:57So you remember, like, when one town revolved around steel making or another town revolved around furniture making or textile making. At that point, you know, to have a good manufacturing job that was well-paying was really a way to, you know, become a middle-class American family. Newberry was one of those towns. It had a long, cherished manufacturing history tied to the textile industry. If you walk around, especially down its main street, you can see its legacy of being a booming textile town back in the day. If you drive around enough, you can actually see some of these dilapidated buildings that used to be cotton mills.

4:45And then when the textile industry in the U.S. fell back, residents of this town began to flow out. There was some farming left. but there really wasn't much going for it.

5:00Rick Farmer's job as Newberry's economic development officer is to keep jobs in town and bring in more. Which is why it was such a gut punch when Caterpillar said in 2016 it was moving out and leaving Newberry with an empty factory. You know, this building's a half a million square feet. This is a very large building, and we're going to have to find the right tenant for it. Everybody looks to your local economic developer when there's a closure, but the reality is we probably don't have any inside information you don't have. This is just something we're going to have to get through. But then Rick caught wind of another project that could turn around his town's fortunes.

5:45I got a call from the broker saying I got a private plane landing in Columbia and it's got 25 Asian engineers in it And I need you to meet them at the facility and give them the local spiel. And of course, I did that. I got there. And sure enough, this is a large contingent. I knew that this had to be a significant project. But honestly, at that early stage, I don't spend much time worrying about who it is. I care about, you know, what they're trying to do and how we're going to make that happen. That large contingent of engineers was with Samsung, the giant Korean manufacturer. Rick gave them a tour of the factory.

6:30And they're talking about ceiling heights and water flows and, you know, water pressure and all of this other stuff. And I'm not an engineer, so I just sit back and look pretty when these things are going on and let the engineers hash it out. What was at stake for you? Well, in a relatively small community, you don't get a lot of opportunities like this. One of the things that worries industrial development prospects is when they're dealing with a small community, where are we going to get the workforce? And that's a big concern because they don't want to have to import labor from outside of the community.

7:07And they worry that we're just too small to make it happen. But, of course, my job was to convince them otherwise.

7:17Samsung was in Newberry looking for a new place to build washing machines. It was scouting several locations around the country. After months of looking, Samsung picked Newberry and announced a$380 million investment. And when you found out you won, what did that feel like? The feeling was absolutely unbelievable. I've never known what it's like to win a national championship in football or anything like that. But it has to be a very similar feeling. You know, we call these big fish or buffaloes and so forth. And so, especially in a small community, you don't win many buffaloes. But we did in this particular case.

8:01It was a wonderful feeling. So how has this deal been for your community? It's been great. It's been a very large economic impact on the community. But even more importantly, I think what it did is it created sort of a bridge. You know, in an ideal situation, a worker will start off with no experience. He's at the bottom of the ladder. He works his way up a little bit. He gains skills and experience. And then at some point, he can take a different job because he's now got the training. He's now got the experience. So it created another pathway for people to kind of leap to the middle of the pack instead of having to just grind your way up.

8:52Trump's washing machine tariffs expired in early 2023. The Samsung factory now employs more than 1 ,500 workers. And it brings in more than a million dollars of annual tax revenue to the city. You know, when I was in the town, I talked to some of the restaurants that were near the factory, and they remember when the factory opened, and they noticed they had more customers. And it just seemed to be a very hopeful moment for the town. And then, you know, months past, you saw more Korean firms come in. So you had at least two Korean firms that were supplying washing machine parts to Samsung come in.

9:34And they then created hundreds more jobs. So there was a bit of a ripple effect on the local level. But on the national level, things were more complicated. That's next.

10:01Samsung's interest in a U.S. factory was influenced by Trump's election. He had vowed on the campaign trail to bring more manufacturing jobs back into the country. And he was talking a lot about trade. He didn't have the specificity as he has today, but he was basically threatening tariffs. And if you were Samsung or any other major multinational, you would know that tariffs would have been coming. And then early on, when he became president, he started talking about industries like steel, aluminum, solar panels and washing machines. Washing machines. In Trump's first term, he took specific aim at imports of these everyday household appliances.

10:47I am taking action to impose safeguard tariffs on imported residential washing machines. What was the situation with washing machines in particular? Trump basically slapped tariffs on this industry after a complaint by Whirlpool, which is an American manufacturer. The complaint was that its competitors overseas were unfairly selling their cheap washing machines to U.S. consumers and that this was threatening U.S. industry and threatening firms like Whirlpool. My administration is committed to defending American companies and they've been very badly hurt. Samsung has previously said that the U.S.

11:31is one of the fastest growing markets for home appliances and called building an American facility a, quote, natural choice. A spokeswoman for Samsung declined to comment on how tariffs affect the company. But those washing machine tariffs from Trump's first term had some downsides. What did these tariffs do to overall U.S. washing machine prices? So this is where it gets a bit tricky. And we had to turn to an economic study that came out around 2020. And the authors of that study essentially did some math to show that prices of washing machines in the U.S. went up about 12 % after Trump imposed his tariffs.

12:20and that averages out to about$86 per washer. I mean, that's what economists say tariffs do, ultimately, raise prices. Right. And the rationale for that is that the firms importing the tariffs might be the ones to bear the burden initially, but they're going to do the math and say, well, we can't really stomach all the costs. We need to pass on some of this cost to the consumer. And, you know, that's how these tariffs ultimately filter through an economy and hit American families. That same study found that the prices of dryers also went up, even though dryers weren't tariffed. Because washing machines and dryers are often sold as pairs.

13:10So companies raise prices on both.

13:16Now, our reporting shows that the price of washing machines in the U.S. has been going up. So, in some ways, it feels like there's a tradeoff between prices and jobs. I absolutely paid more for my washing machine because when the tariffs were instituted, everybody raised their prices. Now, here's the thing, though. The American manufacturers could have decided to keep their prices where they were and take market share from their competitors. But no, they decided to just take the extra profits. So I'm sure there's some truth to the notion that, you know, for every tariff-related job created in America, there are some costs.

14:01My position is, well, we're not bearing those costs here in Newberry County. We're actually finding a way to profit off of the environment. Would you call yourself pro-tariff? Me, I am pro whatever improves my community. Within reason, of course. I'm not talking about crimes or anything like that. But if it improves my community, it's worth pursuing. Do you feel like that kind of policy, though, helps bring manufacturing to the U.S. and to your community? Well, I've heard various different argumentations on tariffs, tariffs good, tariffs bad. But obviously, if you have a facility in your community that, you know, is here because of tariffs, you're going to get some benefits out of that.

14:55But, you know, if you're coming here to avoid tariffs, that doesn't concern me. I want to talk about jobs and wages and that kind of stuff. Samsung says it's considering moving dryer production to Newberry from Mexico, but it hasn't yet made a decision. Are there other Newberries? The Newberry example is just a very rare example where we can say that tariffs did help create jobs. It's, you know, very difficult to find other examples like this. I mean, if you look hard enough, you may be able to find instances where a certain company decided that they didn't want to pay tariffs. And so therefore it made sense to create jobs in America.

15:39But the examples are few and far between. What do you think is the lesson from Newberry? I think the lesson is that the impact of tariffs is very complicated. And whether they help or hurt is sort of in the eye of the beholder. You know, as we can see with these washing machine tariffs, there was a different impact for businesses, for the local economy, for the industry, for the nation. And so, you know, like that's why tariffs I think are so controversial. I mean, they just ripple out in all sorts of unpredictable ways.

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