On Tour, Trump Praises Foxconn Factory and Warns Harley-Davidson

by | June 29, 2018

By Lauren Zumbach

President Donald Trump on Thursday said his demands for "fair and reciprocal trade" are a response to past policies that have allowed other countries to take advantage of the United States.

Trump spoke after turning over dirt at a groundbreaking ceremony for Foxconn Technology Group's planned $10 billion manufacturing complex in the southeastern Wisconsin town of Mount Pleasant.

"That's why this is so beautiful," Trump said, on a stage with signs reading, "Made in Wisconsin U.S.A." and "now hiring."

While Trump praised the Taiwanese electronics giant's plans for a factory that will produce liquid crystal displays as "the eighth wonder of the world," he had less-kind words for another manufacturer, located just 25 miles north: Harley-Davidson. Earlier this week, the Milwaukee-based motorcycle maker said it plans to shift some production overseas, a decision it attributed to the consequences of the president's trade policies.

"Please build those beautiful motorcycles here in the USA again. Don't get cute with us," Trump said, warning, "Your customers won't be happy if you don't."

Harley said the move was an attempt to avoid European Union tariffs imposed in response to trade measures Trump has said are meant to help domestic manufacturers. Critics see the company as an early example of an American business being hurt by international trade disputes. Those clashes can disrupt an economy where even domestic-made goods are part of a global supply chain.

Trump pointed to Foxconn as an example of the "exciting manufacturing story playing out across the country." Wisconsin Gov. Scott Walker, meanwhile, touted its potential to make Wisconsin a "brain gain state, not a brain drain state."

Foxconn founder and Chairman Terry Gou issued a warning of his own to America's traditional tech centers.

"To Silicon Valley, to Boston, 'Wisconn Valley' is coming," Gou said.

The groundbreaking ceremony came about 11 months after Trump and Gou announced plans for a LCD panel manufacturing facility in southern Wisconsin in an event at the White House. Walker and House Speaker Paul Ryan, whose congressional district includes Mount Pleasant, also attended the Washington event last year.

Work to prepare for construction has already begun on the site of the project, where some farmland has been replaced with dirt staging areas for construction equipment.

Backers see the Foxconn project as a can't-miss opportunity to transform the region's economy and build an advanced manufacturing hub around the 22 million-square-foot campus. The plant could eventually employ 13,000 workers, some of whom will likely cross the state line from northern Illinois. If the scope of Foxconn's proposed investment is unprecedented, so are the incentives offered to lure it: $3 billion from the state and $764 million at the local level if the company hits benchmarks tied to jobs, wages and investment. Infrastructure spending approved in connection with the project could bring the total to $4 billion.

Celebrating the Foxconn groundbreaking against the backdrop of Harley's news feels "a little schizophrenic," Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, acknowledged Wednesday.

"It's akin to the president helping bring a new guest to the dinner party while stepping on the toes of someone already at the party," Sheehy said.

But he said he's hopeful the trade dispute will be resolved, and he remains confident Wisconsin's "calculated investment" in its economic future, in the form of the Foxconn deal, is going to pay off.

Wisconsin voters are more divided. About 46 percent of registered voters think the state is paying more than the plant is worth, while 40 percent thought it would provide at least equal value, according to a recent Marquette Law School poll. Most voters thought the Foxconn plant would boost the Milwaukee-area economy, but statewide, only 29 percent thought their local businesses would benefit.

The project has become an issue in Wisconsin's race for governor, where Democratic candidates seeking to unseat Walker have criticized the size of the incentive package.

Their challenge will be finding a way to criticize the deal's economics without appearing to oppose a project bringing jobs, said Marquette law professor Charles Franklin, the poll's director.

Others have raised concerns about the impact on the environment and homeowners living on land within the boundaries of the Foxconn project, who say they're being forced to move to make way for the development.

Kim Mahoney said she still hasn't reached an agreement with the village on selling the home where she lives with her husband and 12-year-old daughter. Appraisers working with the village said her home, in a subdivision on land promised to Foxconn, was worth considerably less than an appraiser she'd hired independently, she said. Mahoney doesn't want to downsize or settle for a neighborhood that lacks the rural feel her family chose.

But she thinks she'd oppose the project even if her home hadn't been affected, due to concerns about its environmental and financial impact.

"There was no consideration of the impact on residents," Mahoney said. "I don't know how this plays out for the state, but it's another example where big business is getting all this money and it's only going to benefit so many people that get these jobs."

The day before he was scheduled to speak at the Foxconn groundbreaking, Trump bashed Harley-Davidson on Twitter.

"Other companies are coming back where they belong! We won't forget, and neither will your customers or your now very HAPPY competitors!" he wrote.

But the iconic company isn't the only one saying it's feeling the pain of the administration's trade policies. Poplar Bluff, Mo.-based Mid-Continent Nail laid off 60 workers and said it's planning 200 more job cuts, citing a slowdown in sales after Trump put tariffs on metals including steel and aluminum.

While those tariffs should help the steel industry, there are significantly more people employed in businesses that use steel as an input and will face higher costs, said Phil Levy, adjunct professor of strategy at Northwestern University's Kellogg School of Management.

Harley hasn't said whether U.S. jobs would be lost as a result of the shift in production. The leader of a union representing its workers accused the company of using the tariffs as an excuse to move jobs overseas.

Robert Gulotty, a University of Chicago political science professor who studies trade, agreed it was unlikely Harley would invest in moving production solely because of a temporary retaliatory tariff.

The bigger concern is the new sense of uncertainty about how U.S. trade policy will affect the cost of doing business, particularly for companies that assemble products in the U.S. but source components and sell finished products worldwide, Gulotty said.

That will almost certainly include Foxconn's Mount Pleasant plant, though it's not yet clear whether specific tariffs announced so far could affect that project.

Tariffs also could be a negotiating tactic meant to help the U.S. secure more favorable trade deals, but Gulotty said he's skeptical any gains would "be worth the disruptive effects these same policies have here at home."

While businesses are concerned about the prospect of tariffs and don't like uncertainty, Sheehy, of the Metropolitan Milwaukee Association of Commerce, said there's also support for efforts to strike the right balance between free trade and "fair trade."

"We have to see how this plays out," he said.

(c)2018 Chicago Tribune