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A comeback for California manufacturing? Trump 2.0 raises hopes — and some worries

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A comeback for California manufacturing? Trump 2.0 raises hopes — and some worries

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:

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“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.

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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.”

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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.

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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 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.

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(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.

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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.

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“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.

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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.”

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Video: The Federal Reserve Cuts Interest Rates By a Quarter Percentage Point

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Video: The Federal Reserve Cuts Interest Rates By a Quarter Percentage Point

new video loaded: The Federal Reserve Cuts Interest Rates By a Quarter Percentage Point

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The Federal Reserve Cuts Interest Rates By a Quarter Percentage Point

Jerome H. Powell, the Federal Reserve chair, announced the central bank’s final interest rate cut for the year and suggested only two more reductions in 2025.

The economy is strong overall and has made significant progress toward our goals over the past two years. The labor market has cooled from its formerly overheated state and remains solid. Inflation has moved much closer to our 2 percent longer-run goal. We are committed to maintaining our economy’s strength by supporting maximum employment and returning inflation to our 2 percent goal. But as for additional cuts, we’re going to be looking for further progress on inflation as well as continued strength in the labor market. And as long as the economy and the labor market are solid, we can be cautious about — as we consider further cuts.

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Prop houses and other Hollywood businesses seek to promote filming in California

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Prop houses and other Hollywood businesses seek to promote filming in California

Nearly three dozen local film, television and streaming production businesses and associations have launched an advocacy group aimed at improving conditions for filming in the state.

The California Production Coalition, formed this week in Los Angeles, aims to voice the concerns of prop houses, equipment leasing firms and other businesses that serve the film and TV industry, which has been been slow to rebound after the pandemic and strikes last year by actors and writers.

The group, whose members include the Motion Picture Assn. (MPA), Television City Studios and the Hollywood Chamber of Commerce, also will lobby in support of expanded tax breaks for the industry.

“I joined this coalition to support whatever measures can be taken to ensure that this industry is part of California,” said Kavon Elhami, CEO of Camtec Motion Picture Camera Systems, a 35-year-old business based in Burbank.

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“It is absolutely important that these businesses come together to have a voice,” he added.

The group will seek to educate policymakers and the public about the benefits of the state’s film and TV industry as well as support policies and incentives that will reduce red tape and create a more effective environment to film in the state. Rivals such as Georgia, New Mexico and Australia have lured filmmakers with more generous incentives.

The coalition’s first order of business is to get behind Gov. Gavin Newsom’s proposal, unveiled in October, to more than double the amount of money allocated annually to California’s film and TV tax credit program to $750 million from $330 million.

Between 2015 and 2020, the state’s film tax credit program generated $961.5 million in tax revenue and supported more than 110,000 local jobs, according to a study by the Los Angeles County Economic Development Corp.

The idea for the coalition began last summer, when several local businesses and vendors that have long bolstered the industry began talking about ways in which they might organize and voice their concerns.

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“This coalition got together to see what we could do to stay in business,” said Pam Elyea, owner of History for Hire, a 40-year-old prop rental company based in North Hollywood.

Elyea said the MPA brought a number of businesses together to talk about increasing the state tax incentives to remain competitive.

“We have the home-court advantage of doing this for 100 years. We have phenomenal resources,” she said.

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Supreme Court to hear TikTok case before ban deadline

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Supreme Court to hear TikTok case before ban deadline

The U.S. Supreme Court has decided to hear TikTok’s challenge to a law that would ban the popular social media app next month unless its Chinese owner sells it.

The case is set for Jan. 10, nine days before TikTok is scheduled to be shut down in the U.S.

In announcing its decision, the court instructed lawyers for TikTok and the government to prepare arguments around the question of whether the impending ban, which lawmakers feel is needed to block potential meddling by Chinese authorities, would violate the 1st Amendment.

With time running out before the ban takes effect Jan. 19, the justices agreed to decide the TikTok case on a fast-track basis, scheduling two hours of oral argument.

“We’re pleased with today’s Supreme Court order,” TikTok spokesperson Michael Hughes said in a statement. “We believe the Court will find the TikTok ban unconstitutional so the over 170 million Americans on our platform can continue to exercise their free speech rights.”

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The legal battle over TikTok poses a conflict between the American tradition of wide-open free speech versus the potential national security threat of a Chinese-owned company that collects the personal data of its users.

TikTok’s future in the U.S. has been uncertain since 2020, when then-President Trump moved to shut down the short-form video app, which people use to share dance routines, news stories, recipes and funny videos.

Trump and others raised the prospect that ByteDance, which owns TikTok, could assist the Chinese government by sharing data it collects from its American users; embedding malicious software in the app; or helping to spread disinformation.

That set off years of back-and-forth between TikTok and the U.S. government. In April, President Biden signed a law that required ByteDance to sell its U.S. operations to a non-Chinese entity or be shut down.

The companies responded by suing the U.S. government in May, saying a ban would violate 1st Amendment rights. They also said that the new law “offers no support for the idea” that TikTok’s Chinese ownership poses national security risks.

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“Speculative risk of harm is simply not enough when First Amendment values are at stake,” TikTok and ByteDance said in their filing.

The U.S. Court of Appeals for the District of Columbia Circuit upheld the law two weeks ago, paving the way for a Supreme Court showdown.

In a 3-0 decision, the D.C. Circuit Court rejected TikTok’s free-speech claim, saying the government is not opposed to the content on the social media platform, but to the owner of it.

Judge Douglas Ginsburg cited testimony from the government’s security experts who concluded that they “did not trust” TikTok’s owners to protect the privacy of Americans. That is not a problem of social media in general, he said.

“TikTok is the only global platform of its kind that has been designated by the political branches as a foreign adversary controlled application,” Ginsburg wrote in the Dec. 6 decision.

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Like the appellate court, the Supreme Court justices could be wary of overturning the judgment of Congress and two presidents on a matter of national security.

In the spring, a few notable names announced their interest in buying the U.S. portion of TikTok, including Treasury Secretary Steven Mnuchin, who said he was assembling an investor group. Since the law passed, however, there has been little public indication of a possible sale.

On Wednesday, another interested buyer, former Dodgers owner Frank McCourt, said he expected the Supreme Court to uphold the law and reiterated his plans to make an offer along with other investors.

The group’s proposal, McCourt said in a statement, would “migrate this vibrant community to an American-made tech stack that gives people control of their data and embraces a transparent approach to content recommendation and moderation.”

Free speech organizations have warned that enforcing the ban would set a bad precedent.

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“We should be concerned about this law as Americans who engage with one another on social media, but we should also be concerned about the global system of free expression,” said George Wang, staff attorney at the Knight First Amendment Institute.

If the law is upheld, he said, it’s “hard to see where the stopping point is.”

“Future bans of social media platforms are possible, but maybe also other forms of media,” Wang said. “It really blesses the government’s ability and authority to shut down entire platforms for speech on pretty vague national security justifications.”

TikTok on Monday said that its estimates showed that small businesses on the platform would lose “more than $1 billion in revenue and creators would suffer almost $300 million in lost earnings in just one month” unless the ban was halted.

TikTok’s lawyer before the high court, Noel Francisco, is a familiar figure for the justices, having served as U.S. solicitor general during Trump’s first term.

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Chang reported from Los Angeles and Savage from Washington.

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