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President Trump's trade war isn't bringing outsourced jobs back to US: CEO

  • President Trump first announced metals tariffs on steel and aluminum in March.
  • Since that time, companies operating in China show no sign that the tariffs will deliver on a signature Trump campaign promise.
  • They will hit U.S. consumers, but they won't bring any jobs back to America.
A view of the storage area of galvanized coiled steel following manufacture at ThyssenKrupp steelworks on January 17, 2018 in Duisburg, Germany.
Getty Images
A view of the storage area of galvanized coiled steel following manufacture at ThyssenKrupp steelworks on January 17, 2018 in Duisburg, Germany.

President Trump has doubled down on his retrograde protectionist policies by announcing new metals tariffs on the European Union, Mexico, and Canada. Aside from causing unnecessary conflict with some of our allies, these tariffs are doomed to fail.

Why I am so confident about this? Because I have witnessed firsthand what has happened over the last few months in my industry since the President's first round of tariffs were announced against China.

I run one of the world's largest suppliers of nonstick coatings to the housewares industry and my company is part of a supply chain that ends in the kitchens of 40 million Americans. However, the more important fact is almost all of my American clients manufacture their goods in China. Our industry is in the crosshairs of the president's incendiary trade rhetoric. So, have the threat of tariffs worked over the last few months?

The short answer is absolutely not. Since Trump's announcement about steel and aluminum tariffs was first made in March, none of my clients who manufacture in China even considered moving their operations back to America.

In fact, many of them did the opposite: They immediately started looking at other countries like India, Vietnam, Indonesia, Malaysia, and various Eastern European countries to move their operations to. This is exactly what Trump did not want to happen.

So why don't my clients say uncle and open up factories in America like the president wants them to? Because many of them would lose money and go out of business due to crushing price pressure from American consumers who demand the lowest prices at Wal-Mart, Target, Costco, and Amazon.

"No amount of tariffs will ever drive business back into America if the country isn't the most efficient producer."

This is the key point: Until Americans stop wanting the lowest possible prices (which in my opinion will never happen), capital will continue to naturally flow to the lowest cost producer. It was true a hundred years ago, and it's true today.

Our president has bamboozled his political base into believing that every American company that offshores operations does so because they want to make more profits. What he fails to see is that in highly competitive industries like mine that are somewhat low tech, there is almost no way to produce products in America and make money.

No amount of tariffs will ever drive business back into America if the country isn't the most efficient producer. Tariffs are a pointless tax that hurt both the levying nation (due to price increases at the consumer level) and receiving nation (due to producer job losses caused by lower demand).

Instead of railing against companies who have global operations, and creating false narratives to pump up an excitable mob that is looking for someone to blame, President Trump should recognize that technology will always make certain industries inefficient, and some those industries will probably offshore.

And that's OK.

America is a country that has reinvented itself economically many times (from farming to heavy industry to high tech), and this cycle of education and retraining will hopefully continue forever because of the dynamism of our nation. Let's not forget: around 40 percent of the sales of the entire S&P 500 are from the U.S. to other nations. This is not a one-way street.

President Trump swept into office as a populist promising to "make America great again," and one of his signature promises was to bring home millions of jobs. So far Trump has failed on his promise to bring jobs back home. And he will continue to fail until he accepts that capitalism is a force he can't beat with false rhetoric.

By Ravin Gandhi, founder and CEO of GMM Nonstick Coatings, one of the largest suppliers of nonstick coatings to the $9 billion housewares industry. As a VC investor, Gandhi has stakes in KeyMe, Ampsy, Tred, Lettrs, Amber Agriculture and Hester Biosciences.