An economic bragging rights referee
A trade deal with China is only part of the solution
Despite two years of intense criticism of "Trump's trade wars," the president remains steadfast in his attempts to straighten out the lopsided relations between America and our trading partners. Trump has demonstrated a resolve not seen in the White House since Ronald Reagan limited imports of automobiles, motorcycles, computer chips and steel, and depreciated the dollar to give American manufacturers a fair opportunity to sell their goods at home and abroad.
President Trump has made trade a priority. He has not only renegotiated NAFTA and the Korea-U.S. trade deal, but also imposed import tariffs on steel, aluminum, washing machines and solar panels. What's more, he has taken on the Europeans and the Japanese as excessive imports of their cars flood the U.S. market.
Most prominently in his attempt to halt unfair trade, the Trump administration has levied substantial tariffs on $300 billion in goods from Chinese manufacturers, who have eliminated millions of U.S. jobs and tens of thousands of American factories with their underpriced goods.
In mid-April, it appeared that the U.S. and China would strike a new bargain. But the Chinese, perhaps feeling overconfident due to the torrent of domestic criticism of Trump, blew up the talks by reneging on already settled parts of the deal. The talks restarted after the Trump-Xi meeting in June, but the outcome is still uncertain.
As the 2020 election campaign begins, voters remember that Trump won in 2016 by promising to stop foreign countries' treating the U.S. "like the piggy bank that everybody's robbing." A successful U.S.-China deal might be an enormous electoral boon for the president, but it is only part of the solution. To win reelection, Trump must come through for those who secured his 2016 victory: Americans in the Rust Belt, especially Pennsylvania, Michigan, Wisconsin and Ohio.
The unfortunate truth is that while our economy continues on its record expansion, U.S. manufacturing is still struggling in many industrial categories. Over the past few months, demand for American products has declined, with orders dropping nearly 6 percent in some industries. And while a China deal may help the stock market, that's no reassurance to America's Rust Belt manufacturers, who see little evidence of the economic renaissance they were promised.
One of the biggest hurdles facing U.S. manufacturers has been the indifference of a series of U.S. administrations to their survival in the face of attacks by unscrupulous foreign competitors, with the full backing of their governments. Domestic producers struggle to make a profit as they contend with subsidized international products and comply with U.S. federal and state regulations on the environment, safety, health, and wages-which are reflected in their prices.
Trump is trying to change the situation, but he is met at every turn by entrenched multinational interests and foreign governments attempting to maintain the status quo. As a result, international manufacturers are still dumping their underpriced products in the U.S. market.
This entire phenomenon is demonstrated in the U.S. major appliance market. In 2017, the U.S. International Trade Commission (ITC) investigated a complaint that imports of large residential washing machines by predatory foreign manufacturers were hurting American companies. The ITC found that the continued import surge would result in "serious injury to domestic manufacturers." To save this important part of America's manufacturing base, the ITC recommended relief in the form of a tariff-rate quota.
In January 2018, the president approved that relief for American washer manufacturers by authorizing safeguard tariffs. The result was a big win for U.S. industry: 1,800 new manufacturing jobs were created; more important, the 15,000 existing jobs of hard-working Americans were retained.
The response of flacks for foreign entities, media commentators and academic economists of the discredited free-trade school was predictable: Trying to turn public opinion against safeguards, they produced bogus articles or cited flawed studies, including one study by the University of Chicago, allegedly showing the safeguards to be cost-ineffective. These "analyses," based on limited, selected inputs, are so focused on immediate costs and prices that they miss the bigger picture: 1. foreign corporations are cheating; and 2. their tactics can have a catastrophic impact on the American economy-unless the president puts a stop to them. It's that simple.
Trump's washers safeguard has proven to be an effective trade measure by both encouraging growth in American manufacturing and discouraging exploitative foreign tactics. Our companies should be supported in their commitment to remain and invest in the United States, to employ American workers and to bolster our economy.
Successfully negotiating critical trade deals certainly strengthens the president's case for reelection but does not completely address the country's endangered industrial base. To save American manufacturing, Trump must impose safeguard tariffs in every industry where foreign cheating is occurring (i.e., most industries) and, like President Reagan, lower the exchange rate for the U.S. dollar so that American goods can be competitively priced. Doing so will not only help him garner critical support for 2020 but also cement his legacy as a defender of the American economy.
Kevin L. Kearns is president of the U.S. Business and Industry Council, founded in 1933 to represent domestic American businesses.