No question about it, Apple executives are worried about the U.S trade war with China. The last thing they would want to do is upset President Trump by moving more production to China. Yet that is exactly what they are going to do.
Globalized production offers too many benefits. It has a momentum that government cannot stall, no matter how much it may try to bludgeon the private sector. The benefits of globalization are too great, too much of a match for politicians.
Apple made that clear last month. The 25 percent tariff that the Trump Administration would impose on products from China would hit Apple hard. Apple anxiously spoke out about it last month. But the company has announced it will assemble the latest version of the $6000 Mac Pro in a factory just outside Shanghai, after indicating in 2013 it would continue to assemble it in the United States.
The costs of producing the next version at its Austin facility would be too great. The benefits of production and assembly in China are too clear.
Concentrating more production in China would reduce transportation costs as well as labor manufacturing costs. Production bottlenecks would be reduced. To high-tech executives, that is the reality of production in the 21st century. The notion that companies will do much to please politicians is passÃ©.
Politicians can huff and puff as much as they want. Apple has a factory system made of brick. No government is going to blow their house down.
Most of the truly high-end work for the Mac Pro will continue to be conducted in the United States – R&D, design, marketing, legal. The number of high-end jobs in the United States will not decline.
This is the second clear test for Trumpâ€™s notion that he can pressure U.S companies into maintaining operations in the United States, when the economics say otherwise. Even before he took office, as President-elect, Trump persuaded then Indiana Governor Mike Pence to dip into an investment incentive program to encourage Carrier to retain jobs in Indiana that they had announced were moving to Mexico. However, just a few days after announcing it would keep some of the jobs in Indiana, the CEO of parent company United Technologies told CNBC in an interview that it would use the government funding it received to modernize – and eliminate the jobs altogether.
Ultimately, that is the corporate ace in the hole. Government might be able to force a company to move production to the domestic economy; but it canâ€™t force a company to employ people. AI is becoming better and cheaper all of the time. And the U.S share of the global market is receding. There will be new jobs to manage the production process. Well paid jobs. But government will not be able to protect them.
Companies can just say no to blackmail. Individuals will have to seek out opportunity, and add unique value. No politician is going to save the jobs of the past. People better go about creating the jobs of the future.