The Journal. - The Tariff Trade Off: Jobs vs. Higher Prices

Episode Date: April 8, 2025

President Trump is ramping up his long-planned tariff war, promising to restore “Boomtown USA.” Before the start of the president’s first term, one small town made a bid to revive its manufacturing glory days. After a foreign company came to town, it made some headway. WSJ’s Chao Deng explores the story of Newberry, South Carolina. Further Listening: - Wall Street Speaks Out Against Tariffs  - Trump 2.0: Trade Wars and Deportation Battles  - Trump’s Tariffs Force a New Era in Global Trade  Sign up for WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Rick Farmer works in Newberry, South Carolina as the county's economic development officer. So tell us about Newberry. Sure. First of all, it's a great little community. The city's motto is the city of friendly folks. It is in a lot of ways, it's similar to other small South Carolina towns, or small cities actually, populations about 10,000. Are there grumpy folks in Newberry?

Oh, sure. They're everywhere. Back in 2016, Rick got some bad news. I remember like it was yesterday, April of 2016, I got a phone call. Hey Rick, did you hear the news? And the news was our local Caterpillar plant was closing. Caterpillar, the iconic American manufacturer of construction equipment. It was leaving its factory in Newberry, And that meant losing over 300 jobs.

When you first heard that news that they were moving out, how would you describe it? Well, I knew there would be a lot of concern because again, it was our number one brand. It was the most recognized brand. It was here in Newberry County. They were some of the best jobs in the community. And I remember standing on the floor of community hall explaining to the Rotary Club why this

is not the end of the world. But at the same time, I just wondered how much of that I really believed and how much of that I was just trying to keep folks from panicking. But Newberry was about to get an assist from a presidential hopeful who was promising to revitalize American manufacturing. I am going to bring back our jobs to Ohio and Pennsylvania and New York and Michigan and all of America. And I am not going to let companies move to other countries.

Donald Trump. His main tool to bring those jobs back was tariffs. And for Newbery, that would bring in a new employer and chart a new path to growth. This is the playbook that Trump is now trying to replicate today on a much larger scale. But Newberry's good fortune came at a cost. Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbach. It's Tuesday, April 8th. Coming up on this show, one town that benefited from Trump's tariffs and what it meant for everyone else. Our colleague, Chow Dang, covers the economy and has been following Trump's tariff plans.

What is his policy goal with these tariffs? Okay, so there are a whole bunch. His administration says that tariffs can raise revenue for the US. What is your policy goal with these tariffs? Okay, so there are a whole bunch. His administration says that tariffs can raise revenue for the U.S. They can protect American businesses. They can move manufacturing back to the U.S. They can create jobs for American workers. Do you have a sense of what he's envisioning?

I mean, he has talked about the US manufacturing glory days so by that he's essentially pointing to you know decades back when we had these American towns that revolved around like you know a single factory so you remember like when one town revolved around steelmaking or another town revolved around furniture making or textile making. At that point, you know, to have a good manufacturing job that was well-paying was really a way to, you know, become a middle-class American family. Newberry was one of those towns.

It had a long, cherished manufacturing history tied to the textile industry. If you walk around, especially down its main street, you can see its legacy of being a booming textile town back in the day. If you drive around enough, you can actually see some of these dilapidated buildings that used to be cotton mills. And then when the textile industry in the U.S. fell back, residents of this town began to flow out. There was some farming left, but there really wasn't much going for it.

Rick Farmer's job as Newberry's economic development officer is to keep jobs in town and bring in more. Which is why it was such a gut punch when Caterpillar said in 2016 it was moving out and leaving Newberry with an empty factory. You know, this building's a half a million square feet. This is a very large building and we're going gonna have to find the right tenant for it. Everybody looks to your local economic developer when there's a closure, but the reality is,

we probably don't have any inside information that you don't have. This is just something we're gonna have to get through. But then, Rick caught wind of another project that could turn around his town's fortunes. I got a call from the broker saying I got a private plane landing in Columbia, and it's got 25 Asian engineers in it, and I need you to meet them at the facility and give them the local spiel. And of course I did that. I got there, and sure enough, this was a large contingent. I knew that this had to be a significant project, but honestly, at that early stage, I don't

spend much time worrying about who it is. I care about what they're trying to do and how we're going to make that happen. That large contingent of engineers was with Samsung, the giant Korean manufacturer. Rick gave them a tour of the factory. And they're talking about ceiling heights and water flows and, you know, water pressure and all of this other stuff. And I'm not an engineer, so I just sit back and look pretty when these things are going on and let the engineers hash it out. What was at stake for you?

Well in a relatively small community, you don't get a lot of opportunities like this. One of the things that worries industrial development prospects is when they're dealing with a small community, where are we going to get the workforce? And that's a big concern because they don't want to have to import labor from outside of the community. And they worry that we're just too small to make it happen. But, of course, my job was to convince them otherwise. Samsung was in Newberry looking for a new place to build washing machines. It was scouting several locations around the country.

After months of looking, Samsung picked Newberry and announced a $380 million investment. And when you found out you won, what did that feel like? The feeling was absolutely unbelievable. I've never known what it's like to win a national championship in football or anything like that, but it has to be a very similar feeling. You know, we call these big fish or buffaloes and so forth and so especially in a small community, you don't win many buffaloes, but we did in this particular case. It was a wonderful feeling. So how has this deal been for your community? It's been great. It's been a very large economic impact on the community. But even more importantly,

I think what it did is it created sort of a bridge. You know, in an ideal situation, a worker will start off with no experience. He's at the bottom of the ladder. He works his way up a little bit. He gains skills and experience. And then at some point he can take a different job because he's now got the training, he's now got the experience. So it created another pathway for people to kind of leap to the middle of the pack instead of having to just grind your way up. Trump's washing machine tariffs expired in early 2023. The Samsung factory now employs more than 1,500 workers, and it brings in more than a million dollars of annual tax

revenue to the city You know when I was in the town I talked to some of the restaurants that were near the factory and they remember when the factory opened and They noticed they had more customers and it just seemed to be a very hopeful moment for the town and Then you know months, you saw more Korean firms come in. So you had at least two Korean firms that were supplying washing machine parts to Samsung come in, and they then created hundreds more jobs. So there was a bit of a ripple effect on the local level.

But on the national level, things were more complicated. That's next. Samsung's interest in a U.S. factory was influenced by Trump's election. He had vowed on the campaign trail to bring more manufacturing jobs back into the country, and he was talking a lot about trade. He didn't have the specificity as he has today, but he was basically threatening tariffs. And if you were Samsung or any other major multinational, you would know that tariffs would have been coming.

And then early on when he became president, he started talking about industries like steel, aluminum, solar panels, and washing machines. Washing machines. In Trump's first term, he took specific aim at imports of these everyday household appliances. I am taking action to impose safeguard tariffs on imported residential washing machines. What was the situation with washing machines in particular?

Trump basically slapped tariffs on this industry after a complaint by Whirlpool, which is an American manufacturer. The complaint was that its competitors overseas were unfairly selling their cheap washing machines to US consumers and that this was threatening US industry and threatening firms like Whirlpool. My administration is committed to defending American companies and they've been very badly hurt. Samsung has previously said that the U.S. is one of the fastest growing markets for home appliances

and called building an American facility a, quote, natural choice. A spokeswoman for Samsung declined to comment on how tariffs affect the company. But those washing machine tariffs from Trump's first term had some downsides. What did these tariffs do to overall U.S. washing machine prices? So this is where it gets a bit tricky. And we had to turn to an economic study that came out around 2020. And the authors of that study essentially did some math to show that prices of washing

machines in the US went up about 12% after Trump imposed his tariffs. And that averages out to about $86 per washer. I mean, that's what economists say tariffs do, ultimately, raise prices. Right. And the rationale for that is that the firms importing the tariffs might be the ones to bear the burden initially, but they're going to do the math and say, well, we can't really stomach all the costs. We need to pass on some of this cost to the consumer. And that's how these tariffs ultimately filter through an economy and hit American families.

That same study found that the prices of dryers also went up, even though dryers weren't tariffed. Because washing machines and dryers are often sold as pairs, so companies raised prices on both. Now our reporting shows that the price of washing machines in the US has been going up. So in some ways it feels like there's a trade-off between prices and jobs. I absolutely paid more for my washing machine because when the tariffs were instituted,

everybody raised their prices. Now here's the thing though, the American manufacturers could have decided to keep their prices where they were and take market share from their competitors. But no, they decided to just take the extra profits. So I'm sure there's some truth to the notion that, you know, for every tariff-related job created in America, there are some costs.

My position is, well, we're not bearing those costs here in New Berry County. We're actually finding a way to profit off of the environment. Would you call yourself pro-tariff? Me? I am pro whatever improves my community. Within reason, of course. I'm not talking about crimes or anything like that, but if it improves my community, it's worth pursuing. Do you feel like that kind of policy, though, helps bring manufacturing to the US and to your community? Well, I've heard various different argumentations on tariffs.

Tariffs good, tariffs bad. But obviously if you have a facility in your community that is here because of tariffs, you're gonna get some benefits out of that. But if you're coming here to avoid tariffs, that doesn't concern me. I wanna talk about jobs and wages and that kind of stuff. Samsung says it's considering moving dryer production to Newberry from Mexico, but it hasn't yet made a decision. Are there other Newberrys?

The Newberry example is just a very rare example where we can say that tariffs did help create jobs. It's very difficult to find other examples like this. I mean, if you look hard enough, you may be able to find instances where a certain company decided that it didn't want to pay tariffs. And so therefore it made sense to create jobs in America, but the examples are few and far between. What do you think is the lesson from Newbery?

I think the lesson is that the impact of tariffs is very complicated and whether they help or hurt is sort of in the eye of the beholder. As we can see with these washing machine tariffs, there was a different impact for businesses, for the local economy, for the industry, for the nation. And so, you know, like that's why tariffs I think are so controversial. I mean, they just ripple out in all sorts of unpredictable ways. Before we go, do you have any questions about the Trump administration? If you do, email us and let us know.

Please send a recording of your question to thejournal at wsj.com. That's thejournal at wsj.com. That's all for today, Tuesday, April 8th. The Journal is a co-production of Spotify and The Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.