Manufacturers in some sub-sectors report that enhanced environmental rules can reduce American manufacturers’ competitiveness, increase costs and reduce employment. At least initially, the administration will focus on altering the fuel economy and emissions rules affecting vehicles that will be completed in 2022. Automakers have stated that these rules are too expensive to meet and a study by the Center for Automotive Research found that the Corporate Average Fuel Economy mandate would reduce employment in the American auto industry.
National Association of Manufacturers CEO Jay Timmons said he is upbeat on Trump’s potential to move regulatory and comprehensive tax reform. He said the tax and regulatory burden creates a 12% to 24% cost differential to manufacture in the United States.
“If we can reduce those costs—by tax reform, by regulatory reform, create more investment in jobs here—our goal, at the end of the day, is for every new investment to be invested in the United States so we can build jobs right here,” said Timmons.
Timmons said Trump has indicated he wants to engage in bilateral, country-to-country trade, and he’s hopeful that will occur. Pointing to NAFTA, he said it’s “perfectly appropriate” to open up an agreement 25 years later and make sure it’s “relevant for today and for the future.” Yet he also hopes that officials will be cognizant that U.S. manufacturing exists in a global economy with foreign supply chains that are critical to making final products in the United States. Some in the manufacturing industry have already expressed concerns about a potential border tax adjustment on imports, saying that many raw materials they use come from outside the United States.
Timmons is hoping President Trump will take on “the big three” of tax reform, regulatory reform and infrastructure investment. He expects all will be addressed with this Congress: tax reform and regulatory reform in the next six to nine months, and infrastructure next year. But like many in the sector, Timmons wants clarity.
“Obviously, we’d like some certainty on regulations that are already on the books and to know if there are changes in the making. I would say we’d also like some certainty on where the administration is headed,” said Timmons.
Yet while Trump is indicating intent to reduce regulations and make the U.S. more attractive for manufacturers, he’s also threatening those that leave. In a meeting with manufacturing executives in late-February, he vowed to “punish” companies that move jobs outside the U.S. He also reiterated his promise to make government contracts more efficient, and pointed to his effort to cut the cost of Lockheed Martin’s F-35 fighter jet by more than $700 million.
Lockheed Martin CEO Marillyn Hewson said at the meeting that Trump was ready to take quick action to streamline rules for businesses. “It’s very important that we reduce regulations, that we eliminate those that are burdensome and are unnecessary,” said Hewson.
The Business Roundtable had recently sent a letter to National Economic Council director Gary Cohn which identified 16 regulations of most concern to its members. They included the tightening of national ambient air quality standards for ground-level ozone, EPA limits on new coal-fired power plants, overtime regulations, CEO pay ratio disclosure, employer reporting and tax requirements under the Affordable Care Act, and conflict minerals disclosure rules.
Though Trump campaigned hard on cutting regulations and taxes, many manufacturers say a greater problem is a lack of talent. White House officials listened to CEO concerns about talent but didn’t offer any details. “We were challenged by the president to…come up with a program to make sure the American worker is trained for the manufacturing jobs of tomorrow,” said White House official Reed Cornish.