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By Will Racke
President Donald Trump made keeping manufacturing jobs in the U.S. a primary goal of his presidency, but American companies are still relocating production to Mexico to take advantage of cheap labor costs.
After the election, Trump issued a flurry of Twitter announcements celebrating deals with companies including Ford Motor Co. and Carrier Corp., which shelved plans to build plants in Mexico in favor of adding domestic manufacturing jobs.
The southward pull, however, remains strong enough for some companies to risk Trump’s public wrath. Chicago-based Illinois Tool Works (ITW) and Pennsylvania-based Triumph Group Inc. are two such manufacturing firms planning production relocations to Mexico, according to Bloomberg.
ITW will close an auto parts plant in Mazon, Ill., this month and open up shop in Ciudad Juarez. Triumph Group, which makes components for aerospace companies, is reducing its workforce in Spokane, Wash., and moving production to Zacatecas and Baja California.
The reason labor-intensive companies want to shutter U.S. factories and build plants south of the border is clear: Factory wages in Mexico are about a fifth of those in the U.S. The stark disparity partly explains why Mexican manufacturing jobs climbed 3.2 percent in January from a year ago while they fell 0.3 percent in the U.S, Bloomberg reported.
Trump recently praised Ford for its planned $1.2 billion investment in a Michigan plant, tweeting car makers “are coming back to U.S.”
Big announcement by Ford today. Major investment to be made in three Michigan plants. Car companies coming back to U.S. JOBS! JOBS! JOBS!
— Donald J. Trump (@realDonaldTrump) March 28, 2017
The nine-figure project is expected to create or retain only 130 jobs, however. Ford employs over 7,000 people in several plants in Mexico.
The Trump administration may be able to offset job losses to Mexico by encouraging Asian firms to do what American companies cannot: reduce costs by producing in the U.S.
South Korean electronics giant Samsung, the world’s largest manufacturer of smartphones and televisions, told the Wall Street Journal earlier this month that it intends to make a capital investment of $300 million in U.S. production facilities, which could add as many as 500 jobs. Last year, Chinese auto glass maker Fuyao Glass opened a plant near Dayton, Ohio, capping $1 billion in direct investment stateside.
Fuyao owner Cao Dewang said at the time that the “tax burden for manufacturers in China is 35% higher than in the U.S.,” Fortune reported.