Ford Fallout: How Trump’s Tariffs Are Driving Lower Pay, Layoffs at Automaker

When he enacted tariffs on imported steel along with billions in goods from China, President Donald Trump said his actions would “protect American jobs” and bring balance to U.S. trade agreements. Both things sounded like worthy goals.

However, the actual impact on U.S. auto workers has been quite different. In late September, Ford announced Trump’s steel tariffs were wiping out $1 billion in company profits. That meant employees would lose $1,000 in salary per person, according to profit-sharing agreements in place.

But thousands of workers will get even worse news in the coming months. In early October, Ford executives told NBC News the automaker would be cutting jobs as a result of the market conditions. Analysts predicted over 20,000 Ford employees could face layoffs by next year.

How steel tariffs backfired

President Donald Trump holds up a signed presidential memorandum targeting Chinese products in the Roosevelt Room at the White House on March 22, 2018 in Washington, DC. | Mark Wilson/Getty Images

Many organizations and business owners warned Trump that steel tariffs would drive up prices for all manufacturers. Looking at the impact since March, analysts reported automakers paying 25% more for steel by September. By 2019, the figure will rise to 30%.

That’s how Ford CEO Jim Hackett said his company would lose $1 billion in profits by the end of 2019. The effects would soon be trickling down to worker’s paychecks, where profit-sharing payments arrive periodically. According to an Automotive News analysis, each Ford employee would lose $1,000 in the process.

So in one tangible way, the tariffs did the opposite of protecting manufacturing workers’ economic security. Ford already sourced 95% of its steel from U.S. suppliers, so the main result of the tariffs ended up being higher prices for everyone concerned. Up next: higher sticker prices for consumers at car dealerships, as warned by domestic and foreign producers.

Ford layoffs: 12% of employees at risk following trade war

An employee works on the assembly line for the Ford 2018 and 2019 F-150 truck at the Ford Motor Company's Rouge Complex on September 27, 2018 in Dearborn, Michigan.
Layoffs at Ford could numbers in the thousands in the U.S., analysts predicted. | Jeff Kowalsky /AFP/Getty Images

For all the talk of the booming economy with companies paying 40% less in taxes this year, there have certainly been a large amount of layoffs in 2018. Tens of thousands of workers have already lost their jobs. But Trump tariffs on Chinese goods threaten almost as many workers just at Ford.

According to a Morgan Stanley report cited by NBC News, a 12% reduction in Ford’s 202,000-person workforce is ahead. That would exceed 24,000 jobs around the globe, with the bulk likely to come from the U.S.

There’s a direct link to the decision from Trump’s high-stakes game of chicken with China. When Chinese officials responded to Trump’s tariffs, that made the import cost of the Ford Mustang rise. As a result, production of the American-built muscle car will drop in the coming years, which in turn will mean less of a need for workers in Michigan plants. (It’s hard to see how that would help the trade deficit.)

Ford is the first automaker to take a huge hit from Trump economic policy, but analysts warn it won’t be the last. IN late September, IHS Markit predicted 300,000 auto-related jobs would be lost if Trump implemented all of the tariffs his administration proposed.

Naturally, consumers would end up paying far more for new cars they ended up buying. Analysts expected vehicle costs to rise between $1,800 and $5,700 at dealerships, Reuters reported.