Trump Promised to Bring Back Manufacturing Jobs: How is He Doing?

Mish

US manufacturing employment went downhill with the launch of Trump's tariffs.

China Trade War Didn’t Boost U.S. Manufacturing Might

The Wall Street Journal reports China Trade War Didn’t Boost U.S. Manufacturing Might.

President Trump’s trade war against China didn’t achieve the central objective of reversing a U.S. decline in manufacturing, economic data show, despite tariffs on hundreds of billions of dollars of Chinese goods to discourage imports.

The tariffs did succeed in reducing the trade deficit with China in 2019, but the overall U.S. trade imbalance was bigger than ever that year and has continued climbing, soaring to a record $84 billion in August as U.S. importers shifted to cheaper sources of goods from Vietnam, Mexico and other countries. The trade deficit with China also has risen amid the pandemic, and is back to where it was at the start of the Trump administration.

Another goal—reshoring of U.S. factory production—hasn’t happened either. Job growth in manufacturing started to slow in July 2018, and manufacturing production peaked in December 2018.

Small Success With China, Bigger Losses Elsewhere

An industry-by-industry analysis by the Federal Reserve showed that tariffs did help boost employment by 0.3%, in industries exposed to trade with China, by giving protection to some domestic industries to cheaper Chinese imports.

But these gains were more than offset by higher costs of importing Chinese parts, which cut manufacturing employment by 1.1%. Retaliatory tariffs imposed by China against U.S. exports, the analysis found, reduced U.S. factory jobs by 0.7%.

Trade Wars are Good and Easy to Win 

In March of 2018 Trump boldly announced in a series of Tweets "Trade Wars are Good and Easy to Win". 

These were my comments:

Trade Wars Not Winnable

Those who say trade wars are winnable aren't thinking, they're spouting nonsense.

Economic Madness

The bottom line is simple: If its good for the consumer, it's good policy.

Instead, Trump is promoting trade wars that mathematically cannot be won.

For a mathematical explanation of trade deficits, please see Trump's Tariffs Show He's "Clueless About Trade".

Also consider Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Updated Picture

US Manufacturing Employment 2020-09A

NAFTA Not to Blame

The WSJ inspired this update but I have blasted Trump's tariff nonsense for years.

Manufacturing peaked 14.5 years before NAFTA. Then manufacturing rose for years after NAFTA (but never reached that peak again).

This all goes back to August 15, 1971 when Nixon ended gold convertibility. 

At that time, Nixon’s treasury secretary John Connally famously told a group of European finance ministers worried about the export of American inflation that the dollar is our currency, but your problem.”

Let's revise Connally's statement to make it current.

“Our Currency And Our Problem”

The source of global trading imbalances, soaring debt, declining real wages, and the massive rise of the 1% at the expense of the bottom 90% followed after Nixon closed the gold window.

In response, US budget deficits soared, US treasuries became a key export.

It is impossible for tariffs to fix these fundamental problems especially after Republicans joined the Democrats in no longer giving a damn about deficits. 

The Fed exacerbated the problem with cheap money and low interest rates to spur the economy. 

In the process the Fed blew three economic bubbles in succession, each with a bigger amplitude.

Finally, due to robotics, manufacturing jobs are shrinking everywhere, even China.

If you think tariffs will bring back jobs in this setup, you may as well believe in the tooth fairy.

Correction

I originally posted NAFTA started January 1, 1974. It should have been January 1, 1994. The chart showed the label in the correct place but I mistyped the date. 

Mike “Mish” Shedlock

Comments (38)
No. 1-16
Sechel
Sechel

From the same article

Mr. Trump is one of a long line of U.S. presidents to use tariffs to protect favored industries. President Obama put steep tariffs on Chinese tires, President George W. Bush imposed tariffs on steel and President Reagan hit Japanese televisions and computers.

But Mr. Trump’s enormous increase in tariffs on Chinese goods represented a sharp departure in post-World War II economic history. Since the war, the U.S. has led round after round of global trade talks aimed at reducing tariffs. No longer.

“This is the biggest use of tariffs since the Smoot-Hawley tariffs” during the Great Depression, said Chad Bown, a trade expert at the Peterson Institute for International Economics. “The economic impact is going to take years to play out.”

Trump has adopted a carousel tarriff strategy. The tarrifs are random and nobody knows how much or when. It's designed to destabalize trade

Previous Presidents resorted to tariffs , saw they didn't work and backed away. Trump doubles down . His econonomic advisor Peter Navarro lacks formal econoomics training. It's unclear to what extent Navarro believes in his hoakey theories versus how much he's enabling his boss who has called for tarriffs since the 1980's when he thought Japan was the enemy and not China.

Journal correctly points out that Trump's policies have not aided the manufacturing sector.

Sechel
Sechel

Does anyone really want to fix the trade deficit which would mean the U.S. would most likely need to cut consumption , reduce U.S wages or both?

lurki
lurki

Just want to point out a few numerical booboos. NAFTA started in 1994 not 1974 as labelled on the chart.. Therefore the manufacturing peak in 1974 was 15 years before NAFTA.

lurki
lurki

oops... I meant the peak in 1979 not 1974

Sechel
Sechel

Trump's tax cuts may have contributed to our deficits. The cuts tend to increasing private spending on household consumption of goods and business investment goods.

Trump also views our bilateral trade deficits as if that makes the U.S. a loser. Trump believes deficit means other countries are taking advantage of the U.S. Whether a trade deficit represents a problem depends on whether our spending is prudent or profilgate.

Nickelodeon
Nickelodeon

"The source of global trading imbalances, soaring debt, declining real wages, and the massive rise of the 1% at the expense of the bottom 90% followed after Nixon closed the gold window.

In response, US budget deficits soared, US treasuries became a key export.

It is impossible for tariffs to fix these fundamental problems especially after Republicans joined the Democrats in no longer giving a damn about deficits. "

Thank you for stating this so plainly! Now and then Peter Schiff talks about the loss of "productive jobs" via the loss of the dollar tie to gold in 71', but I don't think many people understand what he's saying. Further, you are right about automation/robots.

Kudos to this write-up.

njbr
njbr

And in the agricultural world of tariffs...With the latest $14 billion farm aid package announced in Wisconsin on Sept. 17, federal payments to farmers are expected to reach a record $51.2 billion this year. The government’s share of farmers’ net cash income will also rise to 39.7%, the biggest in 20 years....

So much for the free marketeers and the bastions of rugged self sufficiency.

Doug78
Doug78

What is Jo Jorgensen industrial policy? I know she doesn't like the Trans-Pacific Partnership" but she didn't give details as far as I see. What is her plan or lack of? You Libertarians here should be giving me reasons to vote for her.

Rocky Raccoon
Rocky Raccoon

There appears to be very little difference in the trade deficits during Obama and Trump. The real difference is Americans are subjected to the Trump trade tax, which means more money is leaving my pocket to pay for items that have tariffs.

RayLopez
RayLopez

Krugman makes a similar point, that the Trump policies had little effect on the trade deficit: https://www.gc.cuny.edu/CUNY_GC/media/LISCenter/pkrugman/tradewarfail.pdf

Put crudely, to get more manufacturing in the USA (and reduce the trade deficit) you need a lot more "pain" than Trump inflicted. Not sure most Americans, who are not engineers nor even want to do science and engineering, would be willing to put up with such pain for possible long-term gain.

Augustthegreat
Augustthegreat

tRump’s tariffs policy may not make sense job-wise, but it make his supporters happy. That’s the whole point.

Sechel
Sechel

I have a trade deficit with my favorite restaurant. I don't view it as bad since I always leave with a full stomach

Lance Manly
Lance Manly

"It is impossible for tariffs to fix these fundamental problems especially after Republicans joined the Democrats in no longer giving a damn about deficits. "

With all due respect, didn't this happen 40 years ago in the 1980s? Since then it has been the deficit only mattered when the other party was in power.

Eddie_T
Eddie_T

I hope the first thing Biden does when elected is to drop the tariffs on Canada. They were the worst idea ever, and the negative repercussions are still playing out daily in both countries. What an incredibly stupid move.

I see the monetary policy as a positive feedback loop. The congress gave the Fed total control of the money supply....and the Fed gave the congress a checkbook that never has to be balanced. It's not surprising that created problems.

The worst part is that there is no real way to reform....how would you get from where we are to where we should be....without a crash of biblical proportions?

Mish
Mish

Editor

Correction thanks to @lurki

I originally posted NAFTA started January 1, 1974. It should have been January 1, 1994. The chart showed the label in the correct place but I mistyped the date.

Thanks!!

Augustthegreat
Augustthegreat

tRump could actually bring back the manufacturing jobs, if he somehow can force the American workers to accept a 1/10 or less of their current salary.


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