Electrolux puts brake on $250 million investment in U.S., because of Trump's steel tariffs

You can't have it both ways. When Apple announced that it was going to repatriate $350 billion because of the tax reform law, we celebrated it as a real-life example of good policy at work. And rightfully so. It was. Friday's announcement from Electrolux is not as much money, but it's still a real-life example of bad policy at work:

Sweden’s Electrolux, Europe’s largest home appliance maker, said on Friday it would delay a planned $250 million investment in Tennessee, after U.S. President Donald Trump announced tariffs on imported aluminum and steel. On Thursday, Trump said the duties — 25 percent on steel imports and 10 percent on aluminum — would be formally announced next week, although White House officials later said some details still needed to be ironed out. “We are putting it on hold. We believe that tariffs could cause a pretty significant increase in the price of steel on the U.S. market,” Electrolux spokesman Daniel Frykholm said. Electrolux buys all the steel it uses in its U.S. products domestically. “So this is not the possibility of tariffs directly impacting our costs, but rather the impact it could have on the market and that it could damage the overall competitiveness of our operations in the U.S.,” Frykholm said. The company is waiting to see the final details of the U.S. plans before making a final decision, he said.

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There's still time for President Trump to claim his threat brought about some sort of concession from whoever, and that he doesn't need to go forward with the tariffs. He needs to do that. There will be more Electrolux-type decisions if he doesn't. There are real-life consequences of policy mistakes like this. The threat to the U.S. economy is not foreign competition. That's a classic misread of how the global economy works. The primary threats to the U.S. economy are a) disincentives to productivity; and b) usurpation of capital from the private sector to the public sector. Foreign competition is a challenge for certain companies, but generally speaking it's a boon to consumers and it spurs competition that makes everyone better. We went through this in the 1980s when people like Lee Iacocca were treated like sages as they wailed about how the big bad Japanese were going to destroy us all. The Japanese made better cars than the Detroit Three, and they ended up building lots of plants in the United States where they employed American workers, while GM, Ford and Chrysler refused to adapt to new global realities and suffered the consequences. They could have improved and competed, but instead they ran to politicians for protection. That did not turn out well. And it won't turn out well for American steel companies either, however much President Trump may think he's doing the right thing. A lot of new jobs just went wanting in Tennessee because a president who usually understands business much better than his recent predecessors did something uncharacterisitc for him: He led with his ideology about trade and failed to think through what he was doing. Maybe the Electrolux decision will show him he needs to step back and do that.