--:-- Noel King: The American economy is starting to shake under the weight of President Trump's tariff chaos.
--:-- Miles Bryan: So your answer to the concern about the tariffs is everything's going to be hunky-dory. Everything's going to be just fine.
--:-- Noel King: And it's not just the stock market anymore. The national economy we learned today shrank in the first quarter of this year. Down three-tenths of a percent.
--:-- Miles Bryan: We haven't had a negative number since first quarter of 22. If it shrinks in the second, that's the dictionary definition of a recession, folks.
--:-- Noel King: Chinese exports to the U.S. are plunging. Keep your third eye open for shortages.
--:-- Miles Bryan: And around the country, tariff layoffs are underway. Major layoffs for UPS. By next month, 20,000 workers will lose their job. And that's on top of several facilities set to close.
--:-- Noel King: All of this, says the press, to bring manufacturing back to the U.S. Except, as we're going to hear, the tariff layoffs are hitting manufacturing now, too.
--:-- Miles Bryan: Coming up on Today Explained, we take a trip.
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--:-- Noel King: And I said, look, I don't think that this is about me personally. At least I hope it's not.
--:-- Miles Bryan: Why don't you try BetterHelp.com slash Explained?
--:-- Noel King: Absolute truth.
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--:-- Noel King: Find the one with BetterHelp. The one is not me, guys.
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--:-- Noel King: That's BetterHelp.com slash explain.
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--:-- Miles Bryan: Explore the Macy's Fall Guide for yourself and shop in-store or online at Macy's.com.
--:-- Noel King: It's Today Explained. Miles Bryan is a senior producer and reporter on the show.
--:-- Miles Bryan: And Miles, you live in Pennsylvania.
--:-- Miles Bryan: President Trump's tariffs were supposed to bring manufacturing back to the United States. They're supposed to create jobs.
--:-- Noel King: But in Pennsylvania, some people are losing jobs as a result of the tariffs. What's happening?
--:-- Miles Bryan: Yeah, the job cuts I'm here to talk about are at Mack Trucks Production Facility and a part of the state called the Lehigh Valley.
--:-- Noel King: The valley is a politically swingy part of a famously swingy state.
--:-- Miles Bryan: It's also exactly the kind of place that Trump says his tariff policies will help.
--:-- Noel King: You know, after World War II, it was this prosperous manufacturing community anchored by the massive Bethlehem Steel Plant.
--:-- Miles Bryan: At the Coke Oven Division of the Steel Plant, many varieties of coal arrive from different mines to be blended.
--:-- Noel King: The home plant here in Bethlehem, Pennsylvania, operated for nearly a century and at one time employed more than 30,000 people.
--:-- Miles Bryan: But, you know, that plant started struggling in the late 70s and ended up bankrupt by 2001, by which point the whole area had been really hollowed out by deindustrialization.
--:-- Noel King: There's even a famous Billy Joel song about it.
--:-- Miles Bryan: I've always loved it. All this history made me do a double take when I saw a local news story out of the valley about how Mack Truck was planning to cut around 10% of its unionized shop floor jobs there.
--:-- Noel King: And the company was citing tariffs specifically as the reason for the cuts.
--:-- Miles Bryan: So last week, I drove up to the area to check it out.
--:-- Noel King: All right.
--:-- Miles Bryan: Who did you get to talk to?
--:-- Noel King: Well, I started in Allentown at the Union Hall.
--:-- Miles Bryan: Hello. I forgot how to turn the alarm off because I've been coming here by myself for a long time.
--:-- Dan Hand: My name is Dan Hand, and I'm a District 1 committee man.
--:-- Miles Bryan: Dan's originally from the Chicago area. I can still hear it in his accent.
--:-- Dan Hand: He moved out here for his now ex-wife about three decades ago and got hired on at Mac.
--:-- Miles Bryan: No college degree. Mac makes the big semi-trucks you see on the highway. Makes dump trucks, garbage trucks, plow trucks.
--:-- Dan Hand: Mac is a very ingrained company within the Lehigh Valley.
--:-- Miles Bryan: So right now, this union hall sits on Mac Boulevard. Mac World Headquarters used to be across the street from us.
--:-- Dan Hand: It's a very iconic American brand. It feels very American.
--:-- Miles Bryan: Yes, it does. You hear about it on TV all the time. There's a lot of different sayings, like built like a Mac.
--:-- Dan Hand: You also hear that when somebody gets hit by something, it feels like you're getting hit by a Mac truck.
--:-- Miles Bryan: All true. This is a very well-known brand.
--:-- Dan Hand: So is this a good job?
--:-- Miles Bryan: In Dan's telling, it was an excellent job when he started.
--:-- Dan Hand: You know, he told me this story of applying with literally thousands of other applicants back in 1998.
--:-- Miles Bryan: And out of that, I think it was 40 people were hired.
--:-- Dan Hand: Jeez, that's more elite than, you know, an Ivy League school.
--:-- Miles Bryan: Things were a lot different back then.
--:-- Dan Hand: As far as like with our medical, we didn't have any co-pays or anything like that.
--:-- Miles Bryan: These days, it's not quite as competitive, but the jobs are still really good for this area.
--:-- Dan Hand: And recently, Dan said Mac seemed to be on an upswing. It was preparing for the launch of a new flagship model, and as recently as January was hiring a lot.
--:-- Miles Bryan: What happens between then and last week that led to the company announcing layoffs?
--:-- Dan Hand: Well, all of a sudden we find out that the company decided to have a meeting with us and said that things aren't going very well.
--:-- Miles Bryan: They are blaming the tariffs.
--:-- Dan Hand: That was fast.
--:-- Miles Bryan: Yeah, Dan said it was a total shock.
--:-- Miles Bryan: And, you know, I reached out to Mac's corporate spokesperson. They wouldn't do an interview, but they sent me a statement blaming possible regulatory changes and, quote unquote, market uncertainty and those tariffs.
--:-- Dan Hand: And these layoffs are supposed to come sometime in the next couple of months.
--:-- Miles Bryan: OK, so you were at the union hall. Are Dan and the other men and women in the union, are they mad about the tariffs?
--:-- Dan Hand: Well, they're uniformly pissed about the layoffs, but they have mixed feelings about the tariffs because they know that the point of the tariffs, at least in theory, is to protect them to protect this kind of work.
--:-- Miles Bryan: And these workers in the Lehigh Valley, they might need that protection.
--:-- Dan Hand: So last year, we got notification from the company that they decided that they going to build a plant in Mexico
--:-- Miles Bryan: Uh Yeah this is a whole other part of the story I told you about yet Last year Volvo which owns Mack Truck announced it was building a big new truck plant in Mexico
--:-- Dan Hand: The company says it meant to supplement American workers not replace them
--:-- Miles Bryan: But Dan and the rest of his union chapter are really freaked out.
--:-- Dan Hand: You know, they're worried that their jobs are going to end up down in Mexico, like so many other autoworker jobs have moved over the years.
--:-- Miles Bryan: And last month, the local put out a press release with this sort of dramatic video that condemned Mack's decision.
--:-- Dan Hand: The policies that reflect trade have not been on the worker's side for many years.
--:-- Miles Bryan: And argue tariffs are a good tool to fight it.
--:-- Dan Hand: Those are good jobs that we need to fight for.
--:-- Miles Bryan: All right, so you have a union that is facing layoffs because of the tariffs, making the argument for tariffs. Why do they say tariffs are a good tool?
--:-- Dan Hand: Well, they make it more expensive to import vehicles from Mexico.
--:-- Miles Bryan: And that mitigates the cost savings companies get from moving production to Mexico, where wages are way lower than they are here in the U.S.
--:-- Miles Bryan: But, you know, the union put out that press release in March, before Trump's Tariff Liberation Day, before we saw how this was going to play out, and before Mac announced layoffs because of those tariffs.
--:-- Dan Hand: What do Dan and the others that you spoke to think of Trump now?
--:-- Miles Bryan: That's a complicated question.
--:-- Dan Hand: Take our union guy, Dan Hand. He's a registered Republican, big Second Amendment guy.
--:-- Miles Bryan: He voted for Trump in 2016, but then soured on him because of how he treated organized labor in his first term.
--:-- Dan Hand: And, you know, he was in that video in March.
--:-- Miles Bryan: He's not against tariffs in general, but he's not thrilled about how Trump's been rolling them out so far.
--:-- Dan Hand: I mean, it's it doesn't seem very well thought out.
--:-- Miles Bryan: One thing I did find out that's not really widely published is the fact that for any steel coming into the United States or aluminum, that's at a 25% tariff.
--:-- Dan Hand: And what's that mean for you guys?
--:-- Miles Bryan: Well, our frame rails are made out of steel.
--:-- Dan Hand: We have a lot of different parts of our trucks that are made out of steel and aluminum.
--:-- Miles Bryan: So that's going to drive up the cost that the company has to pay for those parts, which is going to in turn probably wind up having to be passed on to the buyer.
--:-- Dan Hand: Well, I guess the counterargument would be that Mac could buy American steel, right? American aluminum.
--:-- Miles Bryan: Well, you would think that, but a lot of the infrastructure that we have has gone away.
--:-- Dan Hand: If you just look over in Bethlehem, Bethlehem Steel is no longer here.
--:-- Noel King: Miles, you met with another union member, John Tanniser. What was his take on the situation?
--:-- Miles Bryan: Yeah, I met John in the parking lot of a grocery store across the street from Mack's plant right after he finished his shift.
--:-- John Tanniser: I worked for Mack Trucks for just short of 27 years.
--:-- Miles Bryan: It was a bit windy, so we climbed into the back of John's Cadillac to chat.
--:-- John Tanniser: If you don't mind moving up so he has just a hair more of it.
--:-- Miles Bryan: John grew up here in the Lehigh Valley.
--:-- John Tanniser: He voted for Trump, and he likes what Trump's doing with the tariffs.
--:-- Miles Bryan: Currently here, we assemble trucks. We don't manufacture them. We don't make the parts that go into them. We put them together.
--:-- John Tanniser: And most of those parts are made somewhere else in the world. They used to be made here.
--:-- Miles Bryan: It's worth noting that he has seniority. He's not as worried about losing his job.
--:-- John Tanniser: But he says his job has gotten a little bit worse every year.
--:-- Miles Bryan: The pay doesn't go as far. The benefits aren't as good.
--:-- John Tanniser: And he's watched manufacturing jobs in this area, his home, dry up over the years.
--:-- Miles Bryan: So he told me he's willing to tolerate a fair amount of pain in service of turning things around.
--:-- John Tanniser: It could be a year. It could be two years.
--:-- Miles Bryan: But what we're looking for is a path forward to thrive and not just sustain and exist.
--:-- John Tanniser: In this economy that we're in currently, there's no going forward. The only way forward is to level the field with the rest of the world and allow Americans to compete.
--:-- Miles Bryan: I hear constantly that the jobs they're talking about Americans don't want to do, maybe garbage picking or food picking or we did it all.
--:-- John Tanniser: We built this nation. We built this country.
--:-- Miles Bryan: Right now, if we were tasked with trying to build the road system that we currently have, how did we do it?
--:-- John Tanniser: We can't even fix the roads that are already here.
--:-- Miles Bryan: We built the entire country. The United States of America was nothing, and it became the global shining castle on the hill.
--:-- John Tanniser: And then something changed, and we've been on a steady decline ever since that point.
--:-- Miles Bryan: We did it before. We certainly can do it again.
--:-- John Tanniser: But it's going to take change.
--:-- Noel King: Miles, how do you hear local politicians trying to capitalize on what's going on with the tariffs?
--:-- Miles Bryan: Yeah, it's already resonating politically.
--:-- Miles Bryan: I met up with one local politician, a Democratic state representative named Josh Siegel, who's been all over this story.
--:-- Josh Siegel: He said it like every other Democrat and that he condemned Trump's tariffs as stupid and self-defeating.
--:-- Miles Bryan: But he said something interesting to me, which is he pointed out that this fixation on the fate of manufacturing jobs like at Mack Truck, it kind of misses the bigger economic picture.
--:-- Josh Siegel: The biggest employers here now are hospitals and Amazon fulfillment centers. They're not factories.
--:-- Miles Bryan: And he was like, if we care about the working class, those are the jobs we should focus on improving, getting them to pay more and have more dignity and stature.
--:-- Miles Bryan: This is the argument of the last 20 or 30 years that the American economy is moving on to other types of jobs.
--:-- Josh Siegel: And we got to make sure that those jobs are good jobs and not spend so much political capital on people like the guys who work at Mac.
--:-- Miles Bryan: What do the guys who work at Mac think about this argument?
--:-- Miles Bryan: Well, I ran it by a few of them. And surprise, surprise, they weren't very moved.
--:-- John Tanniser: We are a service economy currently but things are still made everywhere
--:-- Miles Bryan: There may be more AI involved there may be more robotics but people are still a huge part of the process
--:-- John Tanniser: It is what built the middle class in this country. And you see what happens when it leaves.
--:-- Miles Bryan: We're living it right now. Look at a gear, what that used to be, and Lucent and Western technology. They're all gone.
--:-- John Tanniser: All of them. All those great jobs. It built the valley. You know, he used to say a name like, you know, Lucent.
--:-- Miles Bryan: There are 4,000, 5,000 people working there making good money.
--:-- John Tanniser: They are the ones who bought all these homes, who shopped at all these stores.
--:-- Miles Bryan: It's not there anymore. And we want to bring it back.
--:-- John Tanniser: I want it back.
--:-- Noel King: Miles, thanks so much for sharing your reporting with us today.
--:-- Miles Bryan: My pleasure.
--:-- Noel King: Coming up, we know that what replaced the manufacturing economy was the service economy. Can that ever be as good?
--:-- Miles Bryan: We're going to ask.
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--:-- Miles Bryan: These days, it seems like everybody has a rewards program. You swipe your card and you get one cent on the hundred dollars.
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--:-- Noel King: Yeah, Patty, back it up. Back it up.
--:-- Miles Bryan: It's Today Explained.
--:-- Noel King: Can manufacturing jobs be brought back to places like the Lehigh Valley as the people there would like?
--:-- Miles Bryan: Vox's Dylan Matthews has been trying to answer this question, and we're going to start with what has been happening.
--:-- Dylan Matthews: The share of Americans working in manufacturing has fallen steadily for decades and decades.
--:-- Miles Bryan: It's fallen steadily in every rich country.
--:-- Dylan Matthews: And I think even if we have plants building a lot of things, the facts on the ground suggest to me that jobs are going away and will continue going away.
--:-- Miles Bryan: So I don't have great news for the folks at that plant.
--:-- Dylan Matthews: Why is the share of manufacturing jobs falling?
--:-- Miles Bryan: So the main cause here, when you look into the data, is productivity is going up.
--:-- Dylan Matthews: Manufacturing is incredibly intense in equipment. You rely a lot on machinery.
--:-- Miles Bryan: That machinery can get better. In a lot of plants now, it's robotics. It's literal robot arms coming and helping assembling products on the floor.
--:-- Dylan Matthews: That process of improving that technology and organizing it better leads to big productivity improvements.
--:-- Miles Bryan: That in turn means that you can make more goods with less labor.
--:-- Dylan Matthews: That makes the goods that you're producing cheaper.
--:-- Miles Bryan: And one thing that could happen is that it gets cheaper and then everyone buys a ton more of it because it's cheap.
--:-- Dylan Matthews: That's not really what happens.
--:-- Miles Bryan: What happens is that as people get richer, they spend less on most manufactured goods.
--:-- Dylan Matthews: And so the end result of this process is the share of manufacturing in the economy falls and the number of people working in it falls as well.
--:-- Miles Bryan: If you go back to, say, 1950, there were a lot of manufactured goods that the average American didn't have.
--:-- Dylan Matthews: A lot of people didn't have cars yet. Most people didn't have TVs, washing machines, dryers, dishwashers.
--:-- Miles Bryan: Lent was an everyday problem to Mrs. Chester O'Donnell of Oakland, New Jersey.
--:-- Dylan Matthews: But not now, with her new 1957 General Electric Filter Flow washer.
--:-- Miles Bryan: Oh, here's something I want in my home, a dishwasher.
--:-- Dylan Matthews: Well, I don't blame you, lady.
--:-- Miles Bryan: The U.S. has gotten rich enough, and a lot of countries have gotten rich enough, that demand for manufactured products is kind of peaking.
--:-- Dylan Matthews: We're nearing that saturation point.
--:-- Miles Bryan: Another dishwasher we already have four one for each member of the family
--:-- Dylan Matthews: And so this combination of really fast productivity growth and people substituting what they spend away from manufactured goods because they reached some point of saturation combines to a pretty bleak picture for the state of manufacturing jobs
--:-- Miles Bryan: Because our spending drives the kinds of jobs that make up our economy.
--:-- Dylan Matthews: OK, so what replaces manufacturing?
--:-- Miles Bryan: So the standard model economists uses is three sectors. So there's agriculture, there's manufacturing, and then finally there's services.
--:-- Dylan Matthews: And services, I find when I talk about services jobs, people think of like being a greeter at Walmart.
--:-- Miles Bryan: And that is a services job.
--:-- Dylan Matthews: But there are a lot of different services jobs, and it's so heterogeneous that it almost feels misleading.
--:-- Miles Bryan: Doctors are service workers, lawyers are service workers.
--:-- Dylan Matthews: The most common kind of service worker is a home health aide.
--:-- Miles Bryan: That's the most common job in America right now.
--:-- Dylan Matthews: Anything that is not directly making a durable finished product counts as services.
--:-- Miles Bryan: And that is what most rich countries are seeing spending shift into, that once people feel somewhat satisfied in the amount of stuff they have, they start to hire a housekeeper or go to a fancier gym and hire a personal trainer.
--:-- Dylan Matthews: That in turn means that employment shifts into those sectors because it's where people want to spend their money.
--:-- Miles Bryan: And some of those jobs are extremely well paid. Doctor, lawyer can make a ton of money.
--:-- Dylan Matthews: Some of those jobs are not as well paid. Home health aid, for example.
--:-- Miles Bryan: So when people talk about manufacturing jobs as good jobs, and we say service sector jobs replace them, Is manufacturing being replaced by good jobs?
--:-- Dylan Matthews: So I think this is one of the things that's been really hard about the past few decades.
--:-- Miles Bryan: One thing that's changed is that manufacturing as a job has changed.
--:-- Dylan Matthews: It used to be that manufacturing paid above median wages.
--:-- Miles Bryan: It was a place where people, predominantly men, who had only a high school degree or even dropped out of high school could get a good wage.
--:-- Dylan Matthews: Nearly 700,000 men and women work in the iron and steel industry.
--:-- Miles Bryan: And they're among the world's best paid workers, earning around $4 billion a year for an average of more than $20 a day.
--:-- Dylan Matthews: Steady work and steady pay constitute one of the biggest goals of the American worker and his employer.
--:-- Miles Bryan: Manufacturing now pays slightly worse than the average job in America.
--:-- Dylan Matthews: So the premium that used to be there has diminished a lot.
--:-- Miles Bryan: More broadly, what's happened is what a lot of researchers call job polarization.
--:-- Dylan Matthews: That there used to be a middle represented by sort of good manufacturing jobs that would earn you a middle class income.
--:-- Miles Bryan: And the middle has been kind of hollowed out.
--:-- Dylan Matthews: And what's left are at the bottom sort of fairly routine jobs that don't require a lot of education, like retail clerk, some home health aid jobs, though that can be very skill intensive, stocking, Amazon factories, things like that, which tend to not be highly paid.
--:-- Miles Bryan: And then at the other end, jobs like doctors and nurses, software developers, things that require a lot of education and training and command a higher wage.
--:-- Dylan Matthews: And so it looks like a U-curve, that it's sort of feast or famine.
--:-- Miles Bryan: And I think that's part of what's made this transition so vicious is if you're a 55-year-old working in the Mack truck plant, you get laid off.
--:-- Dylan Matthews: The jobs that are available to you aren't probably going to be the higher-end skilled jobs because they require an education that you didn't get and you don't have time to get before you retire.
--:-- Miles Bryan: The ones that are available are the lower-wage services jobs.
--:-- Dylan Matthews: And so that transition is genuinely incredibly hard.
--:-- Miles Bryan: And a lot of people have lost out on that.
--:-- Dylan Matthews: So the trend is, it's not just in the United States, you said. The trend is, as a country gets richer, it moves from a manufacturing economy, a lot of manufacturing jobs, to a service economy, more service jobs.
--:-- Miles Bryan: They can be great jobs or they can be less well-paid jobs.
--:-- Dylan Matthews: There are a lot of people still in America like John, the guy we heard from in the first half of the show, who have seen this shift.
--:-- Miles Bryan: And what they have seen is not progress, not getting richer. It is the community is hollowed out.
--:-- Dylan Matthews: People lose their jobs.
--:-- Miles Bryan: How do we square this narrative of broad progress with the facts in a specific place like the Lehigh Valley?
--:-- Dylan Matthews: The U.S. is a really big place.
--:-- Miles Bryan: And some places can be prospering at a time when other places are not as much.
--:-- Dylan Matthews: The trajectory for a place like Boston or San Francisco or Dallas, sort of big cities that attract big industries and where wages for everyone, not just people in those industries, but service workers around them, people working retail jobs nearby the Google offices or the biotech firm in Boston, they've really gained.
--:-- Miles Bryan: So I think part of it is if you look only at where the costs are concentrated, you're going to see costs.
--:-- Dylan Matthews: But it's not the whole picture.
--:-- Miles Bryan: That being said, it really sucks.
--:-- Dylan Matthews: Like, I'm not going to try to sugarcoat what's happened from the point of view of a Mack truck plant worker.
--:-- Miles Bryan: Their life has gotten worse because of this transition.
--:-- Dylan Matthews: They have borne the brunt of this big change.
--:-- Miles Bryan: And I think going forward this is going to be important because this is not going to be the last shock that the U.S. faces.
--:-- Dylan Matthews: The labor market could change a lot due to AI.
--:-- Miles Bryan: It could change a lot due to other policies from Trump or someone else.
--:-- Dylan Matthews: It could change a lot if our relationship with China changes and we need to be able to cope with big shifts like that.
--:-- Miles Bryan: I think what you saw at the Macktrek plant is an example of us failing and letting down people during a big transition.
--:-- Dylan Matthews: And we can't do that again.
--:-- Noel King: Vox's Dylan Matthews. Miles Bryan produced and reported today's episode.
--:-- Miles Bryan: Jolie Myers edited. Laura Bullard checked the facts.
--:-- Noel King: Andrea Kristen's daughter and Patrick Boyd engineered the show.
--:-- Miles Bryan: I'm Noelle King.
--:-- Noel King: It's Today Explained. Thank you.
