Trump 2.0 raises hopes — and worries — in California manufacturing

WASHINGTON —  Miriam Mesina de Gutierrez was 19 years old when she got hired at Paulson Manufacturing in Temecula. It was the summer of 2001 and the job was only part time: on an assembly line, applying an anti-fog, anti-scratch coating to face shields for workers in other industries.

Never in her wildest dreams could she have imagined where that $6.75-an-hour job would lead. In 2009, Mesina de Gutierrez became Paulson’s human resources manager. Two years later, she moved to international sales. Two more years and she was promoted to vice president of operations.

Then, last fall, Mesina de Gutierrez went all the way to the top: president of the 200-employee company that had been headed by a member of the Paulson family for 75 years.

“Oh, it was a big deal,” said the 42-year-old, who came to California as a middle schooler from her native Colina, Mexico. And to Roy Paulson, 66, the company’s longtime president who sold the business last year and stepped down to be its technical director, Mesina’s elevation spoke volumes about manufacturing’s unique value:

“It offers job opportunities at every level in society, and for people to rise up in the organization,” he said.

American manufacturing had its heyday in the 1950s when workers making things accounted for more than 30% of all employees. But despite Mesina de Gutierrez’s meteoric success story, the landscape is vastly different today. Beginning decades ago, corporations found cheaper places to produce around the world, China turned into an exporting giant, and machines took over hundreds of thousands of well-paid human jobs.

Today, manufacturing’s share of all U.S. payrolls is just 8%. In California, it’s only 7%, though the Golden State is still home to 1.3 million factory workers — the most in the nation — who make products as diverse as computer chips and tortillas, blockbuster drugs and ordinary nuts and bolts, electric vehicles and toy cars.

Now, President-elect Donald Trump has vowed that his return to the White House will bring about a resurgence of blue-collar work across the country. As in his first term, Trump has promised to gear his “America first” policies to spur domestic production and jobs, whether by changing foreign trade rules, imposing tariffs, cutting taxes and government regulations, or all of the above.

“If we want to return to higher levels of growth and innovation, more broadly distributed prosperity, higher wages, so forth, we’re going to have to get that right,” said Oren Cass, founder and chief economist of the right-leaning think tank American Compass, referring to efforts to reindustrialize the U.S. economy.

Exactly what Trump does, and whether it succeeds, will probably have dramatic consequences for the nation’s economy, its politics, its workers and almost everyone else in the country.

Although most economists don’t see domestic manufacturing as likely to prove a major source of new jobs, it still provides among the best opportunities for people without college degrees.

Manufacturing, on average, offers more hours of work and better wages and benefits than private-sector jobs overall, although the pay premium isn’t as big as it used to be. In California, the average earnings for all manufacturing workers was $42 an hour in October, about 5% more than for employees overall.

Expanding the “Made in USA” economy would be especially important for Trump and other Republicans, who have sought with some success to rebrand themselves as the party of the middle class and working people.

“Democrats have been terribly out of step culturally with the working class,” said Harry Holzer, a Georgetown University public policy professor and chief economist in President Clinton’s Labor Department. “They have got to let go of these crazy identity politics and go back to practical issues like creating good jobs and building more houses.”

That realization may be one factor in Gov. Gavin Newsom’s announcement this week of a blueprint for creating better job opportunities for Californians without a college degree.

“Since the election, both the governor and the Democratic state legislative leadership have talked mainly of a new commitment to blue-collar California,” said Michael Bernick, an employment attorney in San Francisco and former director of California’s Employment Development Department.

California’s blue-collar woes and hopes

Over the last half-century, California’s manufacturing employment has fallen more sharply than in the nation as a whole. The end of the Cold War erased more than half of the state’s 200,000-plus aerospace jobs in the 1990s. The next decade saw a similarly steep decline in electronics manufacturing, as China and other Asian countries moved up the value chain.

On the lower end of skills and pay, apparel employment shriveled as Southern California garment makers focused on fashion and small quantities, eliminating tens of thousands of manual labor jobs. California’s furniture industry followed a similar path.

Manufacturing employment overall has been more stable since the end of the Great Recession in 2009, although the last year has seen further cuts,because of layoffs at corporations such as Boeing, Intel and Tesla.

Today, computer-related and electronics producers, including semiconductors and navigational equipment, make up the state’s largest manufacturing sector, employing about 285,000 people. That’s followed by food manufacturing, with 175,000 jobs; and fabricated metal companies, which employ some 120,000 workers who forge, stamp and make products such as cutlery, hand tools, boilers and springs.

All told, more than 30,000 manufacturers operate in the state, mostly small firms, many of them family-owned, according to the California Manufacturers & Technology Assn. The larger ones have business offices in California but tend to manufacture elsewhere, including in low-cost, less-regulated states such as Texas and Arizona.

MGA Entertainment, the Chatsworth-based maker of Bratz dolls and Little Tikes toys, sources mainly from China. In recent years it’s moved some production to Vietnam and elsewhere. And it closed its Mexico operations because of infrastructure issues, said Isaac Larian, MGA’s billionaire founder and chief executive.

The company has one U.S. manufacturing plant in Hudson, Ohio, with about 700 employees. With automation, Larian said, MGA has cut the production cost difference in Ohio from China to 8% to 10%. “But even with that,” he said, “we’re having difficulties. We don’t get the skilled labor. They work for two to three months” and leave.

Larian is hopeful that the incoming Trump administration will be good for business. He said Trump generally was in his first term. Lowering taxes again will help, Larian said, as they did after Trump’s 2017 big tax cuts. His biggest concern is what will happen if Trump follows through on his proposal to slap 10% to 20% tariffs on all imports and raise the levy on Chinese goods to 60%, from 10% to 25% that Trump imposed in his first term. Those tariffs were kept in place by President Biden.

(Trump last month threatened 25% tariffs on Canada and Mexico, and an additional 10% on imports from China, saying he wanted them to curb the inflow of drugs and migrants.)

Toy makers and importers such as MGA were exempt from Trump’s first-term tariffs. “I believe common sense will apply,” Larian said. If not, he said, he would have no choice but to pass on the higher costs to consumers. Annual sales at Larian’s company, which he founded in 1979, have reached $2.5 billion.

Economist Jerry Nickelsburg, director of UCLA’s Anderson Forecast, also is generally bullish on manufacturing, noting that “California has a deep pool of technical talent.”

Paulson’s new boss, Mesina de Gutierrez, is optimistic too. Though trade friction would probably crimp the company’s exports, she wouldn’t talk about what may come down the pike. Instead, she said: “My team is strong.”

Paulson has benefited from multiple patents and its occasional research and development partnership with UC Riverside and other universities. Skilled workers have sustained burgeoning industries such as space exploration, advanced chips and electric vehicles despite recent slumps in tech and aircraft manufacturing and a flight of some businesses, including the headquarters of Elon Musk’s Tesla and SpaceX.

Northrop, Raytheon, Boeing, Lockheed, Tesla and SpaceX have thousands of employees in the state.

What will Trump do?

In his first term, Trump pressured individual manufacturers planning to move production out of the U.S., ultimately with little success. And he often threatened countries with tariffs, sometimes as a bargaining chip, though the tactic often upset financial markets and created uncertainty about what might happen next.

Trump’s tariffs on China prompted many businesses, including Chinese-owned ones, to shift production elsewhere, and the overall U.S. trade deficit didn’t shrink. Trump targeted steel and aluminum imports, which gave a small boost to the domestic metal industry but hurt other American manufacturers, including makers of beer, bicycles and other goods; they ended up paying more for raw materials.

This time will be different, say Trump’s current and former advisors. They say policy won’t be so chaotic as key members of the incoming administration are more aligned and have a more skeptical view of corporate power. Trump backers say they expect him to do what he said in imposing universal tariffs and increasing taxes on China to thwart transshipments of Chinese goods to the U.S. and spur manufacturers to open plants and create jobs on American soil.

Most economists, however, say across-the-board tariffs of 10% to 20% will almost certainly prompt reciprocal measures by other countries, resulting in slower trade and economic activity and higher prices for businesses and consumers.

“The disruptive force of a tariff is much greater today than even in the early 1930s,” said Douglas Irwin, an economics professor and trade historian at Dartmouth College, noting how much bigger and more connected trade and supply chains are today. Broad-based tariffs on imports deepened the Great Depression.

“If we’re trying to reshore manufacturing, tariffs are very blunt and they raise costs for other industries,” he said. “And you have to think about other policies that won’t adversely affect exports to help out manufacturing.”

Whatever Trump does, he will be starting out with a strong American economy and may get a good jobs boost as new semiconductor factories, electric vehicle and parts plants and other green energy projects come online, thanks to the Inflation Reduction Act and the CHIPS and Science Act enacted during the Biden administration. Intel, for example, is getting billions to help pay for a pair of new leading-edge chip factories in Ohio and other projects.

Such government subsidies will help, but it’ll take a lot more to reinvigorate manufacturing, such as cutting red tape and supporting skills training for workers, especially at the state and local level.

“What we know from our and others’ research is that manufacturing is most likely to get a boost from customized assistance to workers and firms rather than large-scale, blunt federal policies,” said Brad Hershbein, a senior economist at the Upjohn Institute for Employment Research in Kalamazoo, Mich.

Hershbein isn’t counting on a resurgence of manufacturing jobs.

“Manufacturing is important for the American consciousness, more so than it may be for the American economy,” he said. “I think a lot of people had in mind that for a large number of people, it was an accessible job [that] you didn’t need that much education or training for that paid relatively well. And there aren’t that many jobs like that available today. People yearn for that.”