Ivanka Trump’s business just absorbed some blows. But more damaging than Nordstrom’s decision to drop her clothing line might have been the reaction from her father, the president.
His lashing out at the upscale department store seems to reflect an approach to industrial policy that often brings unintended consequences.
In response to Nordstrom’s decision, President Trump took to Twitter to complain:
My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person — always pushing me to do the right thing! Terrible!
— Donald J. Trump (@realDonaldTrump) Feb. 8, 2017
Lest the message be unclear, his official presidential account dutifully retweeted the complaint. And his son Donald Trump Jr. followed up with reports that supporters were planning to boycott the store.
Such actions, if meant to disrupt Nordstrom’s business, could be a signal to other retailers that it’ll be costly to cut off existing business relationships with the Trump family. This kind of bullying could have unintended consequences.
Put yourself in the shoes of a purchasing manager considering adding the Ivanka Trump Collection to your stores. Even if you think her products are excellent, Mr. Trump’s outburst provides an incentive not to stock them. After all, if it doesn’t work out, who wants to be in the cross-hairs of an easily angered president with 24.3 million Twitter followers and the power of the regulatory state? It might be far safer to do business with someone else.
Mr. Trump’s strategy to protect his daughter’s business seems to mirror his strategy to protect American jobs. Just as he has made it more expensive for potential partners to sever business relationships with his daughter, the C.E.O.s of Carrier, General Motors and Toyota can attest that he has made it more expensive for them to sever their relationships with American workers.
And when you make it more expensive to exit a relationship, you make it more expensive to enter it.
That extra cost can create a greater harm. It’s a lesson that many European governments have learned the hard way. Research shows that efforts to boost employment by making it difficult or costly to fire workers have backfired. The prospect of a costly and lengthy legal battle for laid-off employees makes it less appealing to hire new workers. The result has been that higher firing costs have led to to weaker productivity, sclerotic labor markets and higher unemployment.
Even France’s Socialist party saw the relationship of easier exits to increased entrances. Facing very high unemployment and a weak economy, some of its party leaders last year tried to make it easier for companies to fire people. But for months, protesters took to the streets to block any legislation.
The prospect of a costly Trump tantrum could give factory bosses reason to think twice before setting up shop in the United States. In the short run, perhaps Mr. Trump’s threats can slow a painful decline. But in the longer run, defending the status quo may do more harm than good.
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The Upshot
Ivanka Trump’s business just absorbed some blows. But more damaging than Nordstrom’s decision to drop her clothing line might have been the reaction from her father, the president. His lashing out at the upscale department store seems to reflect an approach to industrial policy that often brings unintended consequences.
In response to Nordstrom’s decision, President Trump took to Twitter to complain:
My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person — always pushing me to do the right thing! Terrible!
— Donald J. Trump (@realDonaldTrump) Feb. 8, 2017
Lest the message be unclear, his official presidential account dutifully retweeted the complaint. And his son Donald Trump Jr. followed up with reports that supporters were planning to boycott the store.
Such actions, if meant to disrupt Nordstrom’s business, could be a signal to other retailers that it’ll be costly to cut off existing business relationships with the Trump family. This kind of bullying could have unintended consequences.
Put yourself in the shoes of a purchasing manager considering adding the Ivanka Trump Collection to your stores. Even if you think her products are excellent, Mr. Trump’s outburst provides an incentive not to stock them. After all, if it doesn’t work out, who wants to be in the cross-hairs of an easily angered president with 24.3 million Twitter followers and the power of the regulatory state? It might be far safer to do business with someone else.
Mr. Trump’s strategy to protect his daughter’s business seems to mirror his strategy to protect American jobs. Just as he has made it more expensive for potential partners to sever business relationships with his daughter, the C.E.O.s of Carrier, General Motors and Toyota can attest that he has made it more expensive for them to sever their relationships with American workers.
And when you make it more expensive to exit a relationship, you make it more expensive to enter it.
That extra cost can create a greater harm. It’s a lesson that many European governments have learned the hard way. Research shows that efforts to boost employment by making it difficult or costly to fire workers have backfired. The prospect of a costly and lengthy legal battle for laid-off employees makes it less appealing to hire new workers. The result has been that higher firing costs have led to to weaker productivity, sclerotic labor markets and higher unemployment.
Even France’s Socialist party saw the relationship of easier exits to increased entrances. Facing very high unemployment and a weak economy, some of its party leaders last year tried to make it easier for companies to fire people. But for months, protesters took to the streets to block any legislation.
The prospect of a costly Trump tantrum could give factory bosses reason to think twice before setting up shop in the United States. In the short run, perhaps Mr. Trump’s threats can slow a painful decline. But in the longer run, defending the status quo may do more harm than good.
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