Trump tells US business leaders to manufacture at home

President Donald Trump has warned US chief executives that he will impose a "very major" border tax on companies that move manufacturing overseas and export products back into America.

In his first White House meeting with industrial leaders since his inauguration on Friday, Mr Trump stressed that he would look harshly on companies that moved production away from the US. But he also promised his administration would ensure that firms that wanted to open facilities in the US would face fewer regulations.

Mr Trump told the business leaders, including Elon Musk, chief executive of Tesla, and Marilyn Hewson, chief executive of Lockheed Martin, that he would impose a "substantial border tax" on goods that were made overseas by US companies, but would offer "advantages" to those who produced products domestically. He also repeated his campaign promise to slash regulations by as much as 75 per cent without providing details.

“If you go to another country and you decide that you are going to close [a US factory] and get rid of 2,000 people or 5,000 people . . . we are going to be imposing a very major border tax on the product when it comes in, which I think is fair.”

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Threats

While Mr Trump issued similar threats during the campaign and after his election on November 8th, his warning on Monday put companies on notice that he intended to match his campaign rhetoric with action.

In his inaugural speech, Mr Trump argued that the US had “made other countries rich while the wealth, strength, and confidence of our country has disappeared over the horizon”. He stressed that he would implement an “America first” policy that would involve two rules: “Buy American and Hire American.”

Since his election, Mr Trump has put pressure on companies to alter their production plans, in moves that are very rare for a president and have raised concerns among some Republicans that his actions will shift the party away from its traditional free-market philosophy.

With the help of Mike Pence, his vice-president and former Indiana governor, he persuaded Carrier not to close a plant in the midwestern state.

Ford cancelled plans for a $1.6 billion factory in Mexico and pledged to manufacture electric and self-driving cars in Michigan – a state where Mr Trump scored an upset victory over Hillary Clinton in the election – after a series of warnings from Mr Trump about punishing American companies that manufactured overseas.

He has also put pressure on Lockheed Martin to reduce the cost of the F-35 fighter jet, and also warned Boeing that he wanted the firm to reduce the expected price tag for the two Air Force One presidential jets it will build.

In his first days in office, Mr Trump is expected to formally serve notice that the US will not participate in the Trans-Pacific Partnership, a landmark 12-nation trade deal that Barack Obama saw as part of his "pivot" to Asia.

He is also expected to formally notify Canada and Mexico that his administration wants to renegotiate the North American Free Trade Agreement, which was signed into force by then president Bill Clinton in 1994.

Copyright The Financial Times Limited 2017