How Trump's trade policy failed America's workers

How Trump's trade policy failed America's workers
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President Trump is busy positioning himself again as a friend to America’s blue-collar workers. It’s a familiar tune. Four years ago, Trump pledged to restore America’s ailing manufacturing base by reversing decades of pro-trade policy. Once in office, he ordered the largest tariff increases since 1930

With another election looming, it’s time to take stock of Trump’s strategy.

First, some context. The U.S. hemorrhaged almost 30 percent of its manufacturing jobs from 2000 to election night 2016 — roughly five million positions. At the same time, wage growth was slower after the Great Recession than before it. It’s no surprise that many American workers felt globalization’s great promise had been broken

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Trump capitalized on these frustrations to sell voters his “America First” brand of economic nationalism — a set of policies that included raising tariffs to levels unseen since the Great Depression.

The logic behind tariffs is straightforward. Trump claims trade protection provides the insulation American firms need to reopen America’s factories and bring workers back to the line. That’s because slapping duties – Trump doesn’t like to call them taxes – on foreign goods raises their price tag. This shifts demand toward American-made goods, which hopefully creates jobs and pushes up wages.

The numbers tell a different story. 

Let’s look at employment and wage growth from the fall of 2018 until the end of 2019 — before the COVID-19 pandemic devastated America’s workforce.

Over those five quarters, total private sector employment in the U.S. grew by 2 percent. Manufacturing growth was only 0.4 percent — that’s about 45,000 total jobs across the sector employing nearly 13 million prior to the pandemic.

Importantly, the manufacturing industries performing well were not the ones enjoying the most comprehensive tariff protection. Employment growth in industries receiving the widest tariff coverage remained virtually flat, losing about 5,000 jobs. Conversely, employment in less-protected industries grew about 1 percent, gaining 50,000 positions.

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The differences are small in statistical terms. But they suggest tariffs failed to spur widespread employment growth. 

Some industries expanded, including aerospace (+6.2 percent), pharmaceuticals (+6.6), and cooling systems (+4). However, all of these industries received less tariff protection than the average across the manufacturing sector.

Data on wage growth also show little benefit from tariffs.

Average weekly manufacturing wages grew over 10 percent between Trump’s initial tariff hikes and the COVID outbreak. But there is no correlation between wage growth and tariffs. Paychecks grew at the same rate in heavily protected industries (+10.2 percent) as those with less tariff coverage (+10.1). 

What can we make of these numbers?

One might suspect that tariffs were increased around industries that were already doing badly, and that explains why employment growth was slower in protected industries. But the data doesn’t support that story. Employment and wage growth prior to Trump’s tariffs are uncorrelated with the levels of per-industry tariff protection.

A more convincing story is that tariffs simply haven’t done that much to reduce imports. Take washing machines, one of Trump’s earliest, high-profile tariff hikes. Total imports of household appliances were up – not down – in both 2018 and 2019. If tariffs are supposed to help workers by slashing consumption of foreign goods, they tripped over the first hurdle. 

Either way, tariffs contributed very little to worker welfare. Instead, we have to balance hikes like those on steel and aluminum – which led to 671 and 770 jobs, respectively – against the dozen disputes the U.S. faces at the World Trade Organization and the retaliation against American firms. That retaliation matters for workers

The limited success of tariffs does not mean unfettered free trade is the answer. No sensible analyst denies free trade’s costs. The reality of those costs are exactly why a more sensible trade policy is required.

Abroad, this means working cooperatively with trade partners to agree on flexibility for vital industries. Trump’s unilateral action has only frayed diplomatic ties. At the same time, it means more robust enforcement of the labor standards built into America’s trade deals. Trump has only undermined the legal authority of the rules-based trade cooperation. 

At home, trade liberalization has to be supported by guaranteed, structured benefits for workers. Instead, Trump continues to insist that deregulation is the best way to generate growth. One only has to look at COVID-19’s terrible impact on millions of America’s working poor to see the dangers in that strategy. 

Ultimately, there are certainly good reasons to think globalization has broken its promise to blue-collar Americans. But so has the president. A change of course is needed once again.   

Jeffrey Kucik is an associate professor in the School of Government and Public Policy and the James E. Rogers College of Law (by courtesy) at the University of Arizona.