How the Carrier Deal Could Affect US Manufacturing

drill-444513_960_720U.S. President elect Donald Trump is already causing controversy, nearly one month before he officially takes office. He recently announced a deal with Carrier Corp., keeping nearly 1,000 manufacturing jobs here in the U.S. Previously, Carrier had planned to move those jobs from Indiana to Mexico to cut labor costs and increase profits. After talking with the President elect, however, Carrier has since changed its mind. But what exactly does this mean for the future of the manufacturing industry?

According to various reports, Trump was able to strike this deal by offering about $7 million in tax breaks from the state of Indiana, along with threats to Carrier’s parent company, which is one of the leading military contractors for the U.S. government. There’s also evidence suggesting that Trump may pressure other companies to follow suit, such as Rexnord Corp., which recently announced plans to move its production from Indiana to Mexico.

At first glance, some people may view this deal as a success. After all, keeping jobs here in the U.S. is good for the economy. According to Forbes, however, Trump’s approach isn’t a fix-all solution for the manufacturing industry. It’s a great way to approach individual deals, but Forbes says it’s not effective when “applied to the economy as a whole.” And doing so would prove ineffective at reversing the decline in the U.S. manufacturing industry.

The U.S. manufacturing industry isn’t in shambles, though. It’s experienced strong growth in recent months, receiving a positive manufacturing index rating (about 50). This is due in part to a strong dollar, which allows consumers to buy more products. Last year, the manufacturing industry experienced a slight decline, receiving a below-50 index. With the industry back in a positive direction, manufacturing companies are hoping it will stay this way.

But the Carrier deal could be a signal of change. Perhaps that change is good, or maybe it’s negative. At the very least, it’s going to keep jobs in the U.S., allowing some 1,000 workers to stay employed and receive a paycheck. That’s always a good thing. In the long term, though, it could be a different story. We really don’t know what’s going to happen for the future of the manufacturing industry.

Whether or not the Carrier and subsequent “reshoring” deals struck by Trump and his administration have a positive or negative effect on the manufacturing industry remains to be seen.

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