Article by Robert E. Scott, Economic Policy Institute, 10 August 2020
Summary by Barry A. Klinger
“President Trump’s erratic, ego-driven, and inconsistent trade policies have not achieved any measurable progress, despite the newly combative rhetoric. On top of that, COVID-19—and the administration’s mismanagement of the crisis—has wiped out much of the last decade’s job gains in U.S. manufacturing.”
Trump is Not Reshoring Manufacturing
Trump administration often announces plans for future US factories that never materialize.
US continued to lose factories under Trump administration.
Manufacturing job gains 2016-2019 (Trump) about the same as 2010-2015 (Obama).
COVID-19 wiped out 740,000 manufacturing jobs, in part from federal mismanagement of the crisis.
Rising Dollar Increasing Trade Deficits>
Failure to bring manufacturing back to US is shown in trade deficit, which grew 2016-2019.
Strong dollar drives trade deficit.
Dollar needs to fall at least 25% against other currencies.
Instead, dollar rose at end of Obama administration and stayed high under Trump.
Capital flowing into the US pushes up the dollar.
Senators Baldwin (D-WI) and Hawley (R-MO) proposed to reduce foreign capital inflows with a small tax.
Trade deficit will probably shrink due to economic collapse this year, but will return once the economy recovers.
Trump Trade Deals Have Not Helped US Workers
Manufacturing in auto industry, aerospace, etc., continued to move to Mexico under Trump.
US trade deficit with Mexico increased about 30% in 2019 alone.
Trump tariffs have caused China to export more to other countries, which in turn export more to the US.
China has weakened its currency relative to the dollar to compensate for Trump tariffs.
China is unlikely to meet targets to buy $200 billion more from the US.
Trump Tax Policies Encourage Outsourcing
2017 Republican tax law created lower rate for “global intangibles income”, leading to a massive trade deficit in pharmaceuticals.
Factory Loss Helped Trump Win in 2016
80% of electoral votes of the top 25 manufacturing states went to Trump in 2016.
But Trump has not stopped offshoring or decline of US manufacturing base.
We Can Build a Strong US Economy
For sustainable, resilient, manufacturing-based economy:
- rebalance trade
- rebuild infrastructure
- convert to efficient and clean energy systems
US must end tax preferences for offshore production.
US needs aggressive but strategic anti-dumping rules.
Financing Public Investment
Increased federal spending should be financed by debt during COVID recovery.
Once long-term interest rates rise above 2%, raise taxes on the wealthy to pay for investments.
Progressives Must Reshape Trade Policies
“For the past three decades, mainstream Democrats have tied their fates to the twin mantras of free trade and globalization, which have cost millions of jobs and many thousands of factories…. It is time for progressives to own and reject these failed policies, and to build and campaign on a plan to develop a 21st-century New Deal for the domestic economy.”