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Donald Trump’s direct involvement in a deal to keep jobs in a factory in Ohio from being lost to Mexico is a savvy move by the president-elect. It fits his message perfectly. He is the deal-maker, the strong man who doesn’t wait for the politicians and bureaucrats to fix a problem but does it himself.
The deal is also good for the 1,000 employees at a Carrier air-conditioner plant in Indianapolis who will keep their jobs. But it should be worrying to America’s corporations. They are now faced with the prospect of a president who picks favourites and demands something in return for doing so.
The Carrier deal, for instance. Mr. Trump vowed during the campaign (and still does) to impose a 35 per cent tariff on any product manufactured in Mexico by an American company that is shipped back to the U.S. for sale.
That’s not what happened here, since Mr. Trump has not yet been sworn in. What it seems he did do, though, is make it clear that he will remember who his friends are once he is in the Oval Office.
Carrier will get $7-million (U.S.) in state subsidies in exchange for keeping its Ohio plant open. But people who worked on the deal say it is the hard reality that Carrier’s parent company, United Technologies, does billions of dollars’ worth of business with the U.S. government that saved those jobs.
It was apparently made clear to United Technologies that embarrassing Mr. Trump by not striking a deal would be more costly than accepting subsidies to keep one minuscule part of its business on American soil.
This is how business is done in Russia and other countries ruled by despots. Corporations know they have to support the leader’s policies if they want access to lucrative contracts and favourable regulation. The rule of law, which allows businesses to make decisions based on consistent, reliable terms that can be enforced by courts and judges, is replaced with favouritism and cronyism.
Mr. Trump has only done this once. Who knows what the future will bring. But it’s a bad precedent, and he has said he’ll do it again. If he intends to spend his presidency picking economic winners and losers and dispensing economic largesse on a very personal basis, a country once thought of as a safe place to invest will become a risky option. In the long run, that will hurt America’s economy a lot more than the ebb and flow of manufacturing jobs ever will.
Editor's Note: An earlier version of this editorial incorrectly identified the Carrier factory as being in Ohio rather than Indiana. This version has been corrected.