Trump Threatens to Cut GM Subsidies, Repeats "Magic Wand" Claim

In September, Trump proclaimed he had an economic magic wand. He made a similar claim yesterday, then threatened GM.

Economic Magic Wand Claim September 10

Manufacturing Magic Wand Claim November 26

At a Mississippi campaign rally yesterday, Trump bragged that his administration had "found the magic wand" for manufacturing in the United States.

This was just a few hours after GM announced it's closing 8 plants, 4 in the US, and shedding close to 15,000 workers.

In response to the GM announcement, Trump told GM CEO Mary Barra she had "better" reopen plants in the US soon.

Trump Chastises GM November 27

Trump Threatens to Kill GM Subsidies November 27

Yesterday in reference to the Chevy Cruze Trump offered this threat. "Their car is not selling well. So they'll put something else -- I have no doubt that, in a not-too-distant future, they'll put something else. They better put something else in."

Or what?

Today we found out, sort of.

Trump never finished the sentence.

Tariffs Coming

Business Insider discusses Potentially Devastating Tariffs.

Chris Krueger, a policy analyst at Cowen Washington Research Group, told Business insider that GM's announcement on Monday could add more fuel to Trump's desire to impose a 25% tariff on all cars, trucks, and auto parts coming into the US.

Gary Cohn, Trump's former top economic adviser, has said the president asked him why all cars couldn't be made in America.

The move would be economically devastating, economists say. A study from the Peterson Institute of International Economics found that a 25% auto tariff would cause auto production in the US to fall by 1.5% over the first three years and result in a net loss of 195,000 jobs.

Krueger was confident that regardless the impetus for the move, there is only one outcome in the end. "Tariffs are coming," he said.

No Magic Just BS

We are about to find out how little "magic" there is in Trump's wand.

Mike "Mish" Shedlock

Comments (40)
No. 1-18
Sechel
Sechel

how about threatening to repeal the 25% chicken tax mr trump? fact is those g.m. cars aren't selling. if trump wants g.m. to continue building cars they can't sell he's going to have be prepared to buy them. pretty soon we'll look a lot more like china.

one can argue g.m. has wasted money with stock buy-backs and dividends. one can even argue tariffs and subsidies and bail outs prevented g.m. from making hard choices. but you can't brow beat someone into making cars

Why isn't Trump banning all imports across all industries. Based on his logic, we'd be an economic super-power immediately.

stillCJ
stillCJ

Editor

Good, libertarians like Mish & I don't think the government should be subsidizing auto companies anyway. GM should have been allowed to fail; all their lenders (bondholders that is) got completely screwed anyway.

shamrock
shamrock

I can't imagine something much more socialist than a "President" who thinks he should tell CEO's how to run their corporations.

JonSellers
JonSellers

The United States is simply not competitive internationally. We are too much like the Brits. We can't engineer good products because that takes time. And shareholders want their money now. We can't build good products because or workforce is uneducated on not skilled in relevant trades. We are great burger flippers. Lousy welders. Our management is off on golf vacations learning about diversity instead of managing.

Our future is using military power to keep the value of the dollar high. And forcing foreign states to make stuff that we can't for us, while we give them back treasury bonds. It's what we are good at. And God help us if we can't even pull that off one day.

2banana
2banana

Magic.

Obama said the economy was "structurally changed" and 8% unemployment (with those with jobs slinging coffee) was the new normal.

In fact, just to keep 8% unemployment, he would need TARP, the stimulus, HARP, HAMP, QE infinity and adding more to the debt that all other administrations combined.

That we would never see GDP over 4%

That we could never defeat ISIS.

That manufacturing is dead in America.

And that we would bankrupt the coal industry.

That food stamp use would only increase exponentially.

That America would never be oil independent or an exporter of oil.

Etc.

I will take the new magic. It is at least a step in the right direction.

Webej
Webej

This happens everytime the body politic finally gets their way and puts "a businessman" in power. Always a complete disappointment in terms of economic policy and insight.

2banana
2banana

Mish,

Imagine in 2009 when GM declared bankruptcy.

That obama didn't interfere. He would let the system work. That he didn't do all he could to keep the UAW donation flowing to include destroying 100 years of contract law.

GM would have downsized. Insane union costs would have been shed. Poor management would have been fired.

GM would have been a leaner, more nimble and meaner competitor.

And they would have most likely beat Tesla to market with a viable product too.

Today - would we be here having this discussion?

Tinfoilhat
Tinfoilhat

Something has to be done. The magic wand might be b's, but poverty is real. All those skill sets that take an education will get dragged lower as well. I'm pretty sure this. Is 4th down territory for the US just hope war isn't the play call.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

2banana has the right idea. Moreover, Ford would have been smart to follow GM in bankruptcy. GM at least shed some costs. Ford none.

Realist
Realist

I couldn’t agree more Mish. The US needs free market capitalism; free of government subsidies and government interference. Trump is the ultimate in government interference. Talking up some companies one day and deriding them the next. Putting in tariffs which raise their costs of production. Threatening companies if they don’t do what “he” wants.

thimk
thimk

I am getting tired of this 4.2% gdp growth story/bloviation. it is quarter over quarter annualized. the trump fox sycophants (hannity for one (god what a trump kiss ass) love to tout this accomplishment . click through the captcha for gdp growth by president .

wootendw
wootendw

My 2001 GMC Sonoma, which I only bought last March (with a mere 117k mi) has had a major engine failure at 136k mi. I drove the truck across the country twice and back this year, but that, apparently, is all I will see out of it.

The repair shop said it was not a blown head gasket as I had feared, but much worse. They recommended a new engine guaranteed for 100k miles at $4k - more than I paid for the truck. I told them to forget it - I am not buying any more GM cars (or pickups). I am an experienced used car buyer

wootendw
wootendw

Why should US taxpayers subsidize the (mostly foreign) car industry by building a vast highway system? Until the paving and building of roads started, the US had an excellent mass transit system, both inner-city and intercity. Towns sprung up along the railroad tracks as they do on highways now. Every major city had mostly privately owned and profitable trolley and bus systems.

Starting in the mid '50s, the IHS made it even worse as educated people, then living in the cities, bought two cars and a house in the suburbs. Businesses followed, leaving the cities to elect liberal democrats and decay.

How would you get home or to work without your car and the highway today? You'd live near a railroad track or other mass transit corridor.

frozeninthenorth
frozeninthenorth

Two biggest GM subsidies: (1) 11.2 billion given to the company in 2009, (2) subsidiy for electric cars. On "1" above -- it was gift.... now they want it back? on "2" GM has solved the problem -- it is shutting down its Volt production line.

frozeninthenorth
frozeninthenorth

Americans love trucks...so maybe the US highway system is fixed so that only American cars can use them! Sounds logical to me too

MorrisWR
MorrisWR

The President does not seem to be able to learn from his mistakes. I still believe he will go down as the next Hoover and Trumpvilles will be his real estate legacy if the economy tanks (which I am betting on). As for subsidies, there should be zero subsidies of any industry by government in a free market.