After Success in Saving U.S. Jobs at Carrier, Trump Faces Challenge by Mexico and Walmart
Wal-Mart Stores, Inc. (NYSE:WMT), the world’s largest retail chain, announced a $1.3-billion investment in Mexico. Meanwhile, President-elect Donald Trump threatens sanctions on firms moving operations from the United States to other countries.
The Walmart investment seems to fly in the face of Trump’s protectionist policies and the recent Carrier (United Technologies Corporation (NYSE:UTX)) deal. President-elect Donald Trump saved 1,100 jobs at a facility in Indiana.
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But, no matter, Carrier was planning to move the jobs, whether 800 or 1,100, to Mexico. Trump and Pence brought great tax “gifts” to Carrier. Thus, the company did renounce sending the jobs to Mexico. During his election campaign, Trump had made his showdown with Mexico. It was one of his, and apparently, his supporters’, favorite themes.
A few months ago, Mexican President Enrique Peña Nieto had to endure insults and criticisms from his own citizens. He made the error of welcoming Trump in Mexico during the President-elect’s Mexico-wall-peppered campaign.
Trump, a construction tycoon, frequently talked about the wall he would build along the Mexico-U.S. border. It was going to be a “beautiful” wall, and the Mexicans would be paying for it. Now comes another interesting test. Walmart has just created 10,000 new jobs in Mexico.
These are not local retail jobs. They are jobs that would normally have been filled by U.S.-based applicants. In fact, Walmart plans to invest $1.3 billion into this project. It will launch a new logistics operations in Mexico. (Source: “Trump’s Carrier deal has nothing on what Mexican president Enrique Peña Nieto just got from Wal-Mart,” Quartz, December 8, 2016.)
Could Trump Challenge Walmart?
Walmart’s agreement was announced amid fanfare at President Peña Nieto’s residence. Wal-Mart Stores, Inc. executives were on hand to hear the Mexican national anthem. Then Peña Nieto, fellow Latin American politicians, and Walmart executives effused great words in self-congratulatory tones.
The Mexican president hailed it as an excellent example of what free trade can do. Peña Nieto essentially touted the deal as an excellent example of international trade and a testimony to the excellent conditions that Mexico can offer to the business world.
The Mexican officials noted that the investment would be entirely financed with money from profits that Walmart generated in Mexico. This was clearly aimed at silencing any critics, having the slightest doubt about possible transfers of money between the two countries.
The Walmart deal appears to be a Mexican response to Trump’s Carrier success. Trump’s image benefited from the Carrier situation, say polls. (Source: Ibid.)
The Mexican president, needing some image-boosting of his own, touted Walmart, showing Mexicans that Trump’s bark is sharper than his bite.
Walmart already has 2,000 stores in Mexico, with 200,000 employees. Some four million customers every day shop there. For the company, this was a wonderful opportunity to improve its image, as it has been suspected in recent years of having bribed the Mexican authorities to be allowed to open new stores.
It remains to be seen what Trump can do about this. It’s too late to repeal the jobs or to offer incentives to keep jobs in the U.S., as in the Carrier episode. Still, the Carrier and Walmart cases are different. Walmart might be challenging Trump, but the situation is different. In the retail chain’s case, jobs are being directly generated in Mexico, financed from Mexican operations.
Indeed, Mexico, on the surface may have succeeded in uncovering the weak link in Trump’s protectionist stance.
