Tariffs hit like a Mack truck

0:01The American economy is starting to shake under the weight of President Trump's tariff chaos. So your answer to the concern about the tariffs is everything's going to be hunky-dory. Everything's going to be just fine. And it's not just the stock market anymore. The national economy, we learned today, shrank in the first quarter of this year. Down three-tenths of a percent. We haven't had a negative number since first quarter of 22. If it shrinks in the second, that's the dictionary definition of a recession, folks. Chinese exports to the U.S. are plunging. Keep your third eye open for shortages.

0:33And around the country, tariff layoffs are underway. Major layoffs for UPS. By next month, 20 ,000 workers will lose their job. And that's on top of several facilities set to close. All of this, says the press, to bring manufacturing back to the U.S. Except, as we're going to hear, the tariff layoffs are hitting manufacturing now, too. Coming up on Today Explained, we take a trip. Everything's going to be just fine.

1:02It's Today Explained. Miles Bryan is a senior producer and reporter on the show. And Miles, you live in Pennsylvania. I do. President Trump's tariffs were supposed to bring manufacturing back to the United States. They're supposed to create jobs. But in Pennsylvania, some people are losing jobs as a result of the tariffs. What's happening? Yeah, the job cuts I'm here to talk about are at Mack Trucks Production Facility in a part of the state called the Lehigh Valley. The valley is a politically swingy part of a famously swingy state. It's also exactly the kind of place that Trump says his tariff policies will help.

1:37You know, after World War II, it was this prosperous manufacturing community anchored by the massive Bethlehem Steel Plant. At the Coke Oven Division of the Steel Plant, many varieties of coal arrive from different mines to be blended. The home plant here in Bethlehem, Pennsylvania, operated for nearly a century and at one time employed more than 30 ,000 people. But, you know, that plant started struggling in the late 70s and ended up bankrupt by 2001, by which point the whole area had been really hollowed out by deindustrialization. There's even a famous Billy Joel song about it.

2:22I've always loved it. All this history made me do a double take when I saw a local news story out of the valley. about how Mack Truck was planning to cut around 10 % of its unionized shop floor jobs there. And the company was citing tariffs specifically as the reason for the cuts. So last week, I drove up to the area to check it out. All right. Who did you get to talk to? Well, I started in Allentown at the Union Hall. Hello. I forgot how to turn the alarm off because I've been coming here by myself in a long time. With Dan Hand. My name is Dan Hand, and I'm a District 1 committee man. Dan's originally from the Chicago area.

2:58I can still hear it in his accent. He moved out here for his now ex-wife about three decades ago and got hired on at Mac. No college degree. Mac makes the big semi-trucks you see on the highway. Makes dump trucks, garbage trucks, plow trucks. Mac is a very ingrained company within the Lehigh Valley. So right now, this union hall sits on Mac Boulevard. Mac World Headquarters used to be across the street from us. It's a very iconic American brand. Like it feels very American. Yes, it does. It's you hear about it on TV all the time. There's a lot of different sayings like built like a Mac. You also hear that when somebody gets hit by something, it feels like you're getting hit by a Mac truck.

3:42All true. This is a very well-known brand. So is this a good job? And Dan's telling it was an excellent job when he started. You know, he told me this story of applying with literally thousands of other applicants back in 1998. And out of that, I think it was 40 people were hired. Jeez, that's more elite than, you know, an Ivy League school. Things were a lot different back then, as far as like with our medical. We didn't have any co-pays or anything like that. These days, it's not quite as competitive, but the jobs are still really good for this area. And recently, Dan said Mac seemed to be on an upswing.

4:17It was preparing for the launch of a new flagship model. And as recently as January was hiring a lot. What happens between then and last week that led to the company announcing layoffs? Well, all of a sudden we find out that the company decided to have a meeting with us and said that things aren't going very well. They're blaming the tariffs.

4:41That was fast. Yeah, Dan said it was a total shock. And, you know, I reached out to Mac's corporate spokesperson. and they wouldn't do an interview, but they sent me a statement blaming possible regulatory changes and quote-unquote market uncertainty and those tariffs. And these layoffs are supposed to come sometime in the next couple of months. Okay, so you were at the union hall. Are Dan and the other men and women in the union, are they mad about the tariffs? Well, they're uniformly pissed about the layoffs, but they have mixed feelings about the tariffs because they know that the point of the tariffs, at least in theory, is to protect them, to protect this kind of work.

5:17and these workers in the Lehigh Valley, they might need that protection. So last year we got notification from the company that they decided that they're gonna build a plant in Mexico. Uh-oh. Yeah, this is a whole other part of the story I hadn't told you about yet. Last year, Volvo, which owns Mack Truck, announced it was building a big new truck plant in Mexico. The company says it's meant to supplement American workers, not replace them. But Dan and the rest of his union chapter are really freaked out. You know, they're worried that their jobs are going to end up down in Mexico like so many other auto worker jobs have moved over the years.

5:53And last month, the local put out a press release with this sort of dramatic video that condemned Mac's decision. The policies that reflect trade have not been on the worker's side for many years. And argued tariffs are a good tool to fight it. Those are good jobs that we need to fight for. All right, so you have a union that is facing layoffs because of the tariffs, making the argument for tariffs. Why do they say tariffs are a good tool? Well, they make it more expensive to import vehicles from Mexico, and that mitigates the cost savings companies get from moving production to Mexico, where wages are way lower than they are here in the U.S.

6:31But, you know, the union put out that press release in March, before Trump's Tariff Liberation Day, before we saw how this was going to play out, and before Mac announced layoffs because of those tariffs. What do Dan and the others that you spoke to think of Trump now? That's a complicated question. Take our union guy, Dan Hand. He's a registered Republican, big Second Amendment guy. He voted for Trump in 2016, but then soured on him because of how he treated organized labor in his first term. And, you know, he was in that video in March. He's not against tariffs in general, but he's not thrilled about how Trump's been rolling them out so far.

7:07I mean, it doesn't seem very well thought out. Okay, we're putting this tariff on. Oh, we're going to pull this back. Oh, we're taking a pause. It doesn't seem to be targeted at all. One thing I did find out that's not really widely published is the fact that for any steel coming into the United States or aluminum, that's at a 25 % tariff. And what's that mean for you guys? Well, our frame rails are made out of steel. We have a lot of different parts of our trucks that are made out of steel and aluminum. So that's going to drive up the cost that the company has to pay for those parts, which is going to, in turn, probably wind up having to be passed on to the buyer.

7:51Well, I guess the counterargument would be that Mac could buy American steel, right? American aluminum. Well, you would think that, but a lot of the infrastructure that we have has gone away. If you just look over in Bethlehem, Bethlehem Steel is no longer here. Dan's identifying a chicken or the egg problem that's like true across manufacturing right now. Lots of American companies that make stuff here rely on foreign inputs. And making that stuff more expensive hasn't immediately created new steel plants or whatever. Bethlehem Steel is still closed. It's actually a casino now. But it does immediately make it more expensive to build stuff here that relies on foreign material.

8:29And on top of all this, President Trump announced Tuesday that he's watering down some tariffs for automakers who import parts. So all this is still up in the air, and we're not sure how it's going to play out.

8:44Does everyone in the union come down on the same side as Dan in this? No, absolutely not. They're really split on politics and on the tariffs. And I want you to meet one guy who really gets at this, John Tanniser. We met in the parking lot of a grocery store across the street from Mack's plant right after he finished his shift. I worked for Mack Trucks for just short of 27 years. It was a bit windy, so we climbed into the back of John's Cadillac to chat. If you don't mind moving up so he has just a hair more of it. John grew up here in the Lehigh Valley. He voted for Trump, and he likes what Trump's doing with the tariffs.

9:17Currently here, we assemble trucks. We don't manufacture them. We don't make the parts that go into them. We put them together, and most of those parts are made somewhere else in the world. They used to be made here. It's worth noting that he has seniority. he's not as worried about losing his job. But he says his job has gotten a little bit worse every year. You know, the pay doesn't go as far, the benefits aren't as good. And he's watched manufacturing jobs in this area, his home, dry up over the years. So he told me he's willing to tolerate a fair amount of pain in service of turning things around.

9:53It could be a year, It could be two years. But what we're looking for is a path forward to thrive and not just sustain and exist. In this economy that we're in currently, there's no going forward. The only way forward is to level the field with the rest of the world and allow Americans to compete. I hear constantly that the jobs they're talking about Americans don't want to do, maybe garbage picking or food picking or we did it all. We built this nation. We built this country. Right now, if we were tasked was trying to build the road system that we currently have. How did we do it? We can't even fix the roads that are already here.

10:34We built the entire country. The United States of America was nothing. and it became the global shining castle on the hill. And then something changed. And we've been on a steady decline ever since that point. We did it before. We certainly can do it again. But it's going to take change. Do you know what these guys sound like to me? What? Like people who might vote Republican or might vote Democrat based on whoever they think is doing the best job for them. You said this is a swing area. How do you hear local politicians trying to capitalize on what's going on with the tariffs? Yeah, it's already resonating politically.

11:13I met up with one local politician, a Democratic state representative named Josh Siegel, who's been all over this story. He sounded like every other Democrat in that he condemned Trump's tariffs as stupid and self-defeating. But he said something interesting to me, which is he pointed out that this fixation on the fate of manufacturing jobs like at Mack Truck, it kind of misses the bigger economic picture. The biggest employers here now are hospitals and Amazon fulfillment centers. They're not factories. And he was like, if we care about the working class, those are the jobs we should focus on improving, getting them to pay more and have more dignity and stature.

11:50This is the argument of the last 20 or 30 years that the American economy is moving on to other types of jobs. And we got to make sure that those jobs are good jobs and not spend so much political capital on people like the guys who work at Mac. What do the guys who work at Mac think about this argument? Well, I ran it by a few of them, and surprise, surprise, they weren't very moved. Here's what John had to say. We are a service economy currently, but things are still made everywhere. There may be more AI involved. There may be more robotics. But people are still a huge part of the process. It is what built the middle class in this country.

12:31and you see what happens when it leaves. We're living it right now. Look at Aguirre, what that used to be, and Lucent and Western Technology. They're all gone. All of them. All those great jobs. It built the valley. You know, you used to say a name like, you know, Lucent. There are 4 ,000, 5 ,000 people working. They're making good money. They are the ones who bought all these homes, who shopped at all these stores. It's not there anymore. And we want to bring it back. I want it back.

13:14John Tanniser there in the Lehigh Valley, brought to us by Miles Bryan. Thanks so much, Miles. My pleasure. Coming up, we know that what replaced the manufacturing economy was the service economy. Can that ever be as good? We're going to ask.

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16:27Yeah, Patty, back it up. Back it up. It's Today Explained.

16:37Can manufacturing jobs be brought back to places like the Lehigh Valley as the people there would like? Vox's Dylan Matthews has been trying to answer this question, and we're going to start with what has been happening. The share of Americans working in manufacturing has fallen steadily for decades and decades. It's fallen steadily in every rich country. And I think even if we have plants building a lot of things, the facts on the ground suggest to me that jobs are going away and will continue going away. So I don't have great news for the folks at that plant. Why is the share of manufacturing jobs falling?

17:17So the main cause here, when you look into the data, is productivity is going up. Manufacturing is incredibly intense in equipment. You rely a lot on machinery. That machinery can get better. In a lot of plants now, it's robotics. It's literal robot arms coming and helping assembling products on the floor. that process of improving that technology and organizing it better leads to big productivity improvements. That in turn means that you can make more goods with less labor. That makes the goods that you're producing cheaper. And one thing that could happen is that it gets cheaper and then everyone buys a ton more of it because it's cheap.

18:03That's not really what happens. What happens is that as people get richer, they spend less on most manufactured goods. And so the end result of this process is the share of manufacturing in the economy falls, and the number of people working in it falls as well. If you go back to, say, 1950, there were a lot of manufactured goods that the average American didn't have. A lot of people didn't have cars yet. Most people didn't have TVs, washing machines, dryers, dishwashers. Lent was an everyday problem to Mrs. Chester O'Donnell of Oakland, New Jersey. But not now, with her new 1957 General Electric Filter Flow washer.

18:48Oh, here's something I want in my home, a dishwasher. Well, I don't blame you, lady. The U.S. has gotten rich enough, and a lot of countries have gotten rich enough, that demand for manufactured products is kind of peaking. We're nearing that saturation point. Another dishwasher? We already have four, one for each member of the family. And so this combination of really fast productivity growth and people substituting what they spend away from manufactured goods because they've reached some point of saturation combines to a pretty bleak picture for the state of manufacturing jobs. Because our spending drives the kinds of jobs that make up our economy.

19:27OK, so what replaces manufacturing? So the standard model economists uses is three sectors. So there's agriculture, there's manufacturing, and then finally there's services. And services, I find when I talk about services jobs, people think of like being a greeter at Walmart. And that is a services job. But there are a lot of different services jobs. And it's so heterogeneous that it almost feels misleading. Doctors are service workers. Lawyers are service workers. The most common kind of service worker is a home health aide. That's the most common job in America right now. Anything that is not directly making a durable finished product counts as services.

20:08And that is what most rich countries are seeing spending shift into, that once people feel somewhat satisfied in the amount of stuff they have, they start to hire a housekeeper or go to a fancier gym and hire a personal trainer. that in turn means that employment shifts into those sectors because it's where people want to spend their money. And some of those jobs are extremely well paid. Doctor, lawyer can make a ton of money. Some of those jobs are not as well paid. Home health aid, for example. So when people talk about manufacturing jobs as good jobs, and we say service sector jobs replace them, is manufacturing being replaced by good jobs?

20:50So I think this is one of the things that's been really hard about the past few decades. One thing that's changed is that manufacturing as a job has changed. It used to be that manufacturing paid above median wages. It was a place where people, predominantly men, who had only a high school degree or even dropped out of high school could get a good wage. Nearly 700 ,000 men and women work in the iron and steel industry. And they're among the world's best paid workers, earning around$4 billion a year for an average of more than$20 a day. Steady work and steady pay constitute one of the biggest goals of the American worker and his employer.

21:28Manufacturing now pays slightly worse than the average job in America. So the premium that used to be there has diminished a lot. More broadly, what's happened is what a lot of researchers call job polarization. that there used to be a middle represented by sort of good manufacturing jobs that would earn you a middle class income. And the middle has been kind of hollowed out. And what's left are at the bottom sort of fairly routine jobs that don't require a lot of education, like retail clerk, some home health aid jobs, though that can be very skill intensive, stocking, Amazon factories, things like that, which tend to not be highly paid.

22:09And then at the other end, jobs like doctors and nurses, software developers, things that require a lot of education and training and command a higher wage. and so it looks like a u-curve that it's it's sort of feast or famine and i think that's part of what's made this um this transition so vicious is if you're a 55 year old working in the mac truck plant you get laid off the jobs that are available to you aren't probably going to be the higher end skilled jobs because they require an education that you didn't get and you don't have time to get before you retire. The ones that are available are the lower wage services jobs.

22:48And so that transition is genuinely incredibly hard. And a lot of people have lost out on that. So the trend is, it's not just in the United States, you said. The trend is, as a country gets richer, it moves from a manufacturing economy, a lot of manufacturing jobs, to a service economy, more service jobs. They can be great jobs or they can be less well-paid jobs. There are a lot of people still in America, like John, the guy we heard from in the first half of the show, who have seen this shift and what they have seen is not progress, not getting richer. It is the community is hollowed out. People lose their jobs.

23:25How do we square this narrative of broad progress with the facts in a specific place like the Lehigh Valley? The U.S. is a really big place and some places can be prospering at a time when other places are not as much. The trajectory for a place like Boston or San Francisco or Dallas, sort of big cities that attract big industries and where wages for everyone, not just people in those industries, but service workers around them, people working retail jobs nearby the Google offices or the biotech firm in Boston, they've really gained. So I think part of it is If you look only at where the costs are concentrated, you're going to see costs.