Trump Warns U.S. Companies against 'Very Expensive Mistake'

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(Bloomberg) President-elect Donald Trump warned U.S. companies that moving manufacturing to other countries would be a “very expensive mistake” as they will face heavy new taxes—an approach likely to face resistance from lawmakers in his own party.

In an early-morning series of six Twitter posts, Trump summarized a plan outlining an integral part of his campaign position: that shifting production from the U.S. to Mexico, China or other lower-cost countries would be discouraged by punitive tax policy.

“Any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. without retribution or consequence, is WRONG!” Trump said. “There will be a tax on our soon to be strong border of 35 percent for these companies wanting to sell their product, cars, A.C. units etc., back across the border.”

Trump also said he plans to “substantially” reduce taxes and regulations on business.

‘Be Forewarned’
“Please be forewarned prior to making a very expensive mistake,” Trump said. He concluded, in capital letters, that “the United States is open for business.”

Trump won the Nov. 8 presidential election with support from many middle- and working-class workers concerned the economy is stacked against them. The president-elect may find that Republican lawmakers who will set the agenda for the upcoming Congress are not on board with the proposed tariffs.

“I personally prefer carrots over sticks” Representative Jeb Hensarling of Texas, chairman of the House Financial Services Committee, said on Fox News Channel’s “Sunday Morning Futures.”

Asked if he would “prefer not to see a 35-percent tariff,” Hensarling, a fiscal hawk in favor of lower corporate taxes, said “correct.”

Trump reached a deal last week with United Technologies Corp. to keep a Carrier air-conditioning plant in Indiana rather than move it to Mexico. The president-elect signaled he will frequently engage with corporate leaders to protect American workers.

Deal Criticized
“We’re going to have a lot of phone calls to companies that say they’re thinking about leaving this country, because they’re not leaving this country,” Trump said Dec. 1 at the Carrier plant in Indianapolis.

The deal was achieved not through the threat of a tariff, though: the company agreed to keep about 1,100 jobs in Indiana while moving about 1,300 positions to Mexico in exchange for $7 million in tax and other incentives from the state.

The move found critics as diverse as former U.S. Treasury Secretary Larry Summers, Senator Bernie Sanders and 2008 Republican vice-presidential nominee Sarah Palin.

Summers, in a Dec. 2 blog post, said Trump’s intervention was a dangerous shift away from American-style capitalism.

“A principle is being established: it is good for the president to try to figure out what people want and lean on companies to give it to them,” Summers wrote. “Presidents have enormous latent power and it is the custom of restraint in its use that is one of the important differences between us and banana republics.”

‘Crony Capitalism’
Sanders said Trump had essentially established a playbook for companies to win tax incentives by threatening to leave the country, while Palin, the former governor of Alaska, wrote on the website Young Conservatives that the Carrier deal may be an example of “crony capitalism.”

“When government steps in arbitrarily with individual subsidies, favoring one business over others, it sets inconsistent, unfair, illogical precedent,” Palin wrote. “Meanwhile, the invisible hand that best orchestrates a free people’s free enterprise system gets amputated. Then, special interests creep in and manipulate markets. Republicans oppose this, remember?”

Backing Trump’s position on “Sunday Morning Futures,” Newt Gingrich, the former House speaker, said Americans should be “prepared to pay a little bit more for imported products” as a trade-off for more jobs at home.

A study released in May by the National Foundation for American Policy, a non-partisan research group, concluded that the burden of higher import tariffs proposed by Trump during the campaign would hit low-income Americans the hardest.

-With assistance from Jesse Hamilton

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