Trump s trade war does little good for US industry

October 22, 2020 04:29 PM

When President Donald Trump visited a Whirlpool factory in Ohio in August, he boasted that his trade policy had led to the creation of about 200 jobs for the appliance manufacturer at the plant.

But in slapping tariffs on appliances and components imported from China in response to Whirlpool's pleas, the Republican incumbent ultimately hurt American consumers, as prices for washing machines and dryers soared.

The example underscores the double-edged impact of the US leader's aggressive trade tactics, which have produced landmark deals like the USMCA pact with Canada and Mexico and a partial truce with China, but have had adverse effects on everyday Americans and the economy overall.

"There have been some successes, but if you have to assess in the whole, the US is in a worse position with respect to trade than it was when Donald Trump took office," said Edward Alden, a trade specialist with the Council on Foreign Relations.

Geoffrey Gertz of the Brookings Institution agreed, saying he sees no overall gains for American workers from Trump's trade policy.

He pointed to improvements in "a few very small, narrow areas" such as the steel and aluminum industries, but noted the hostile responses Trump's policies earned from abroad.

"Many other countries put retaliatory tariffs on the US, and on many US agricultural exports," Gertz said.

- Consumers, companies pay the price -

Trump has made reviving manufacturing a key plank of his pitch to voters ahead of his November 3 election showdown with Joe Biden, but data show his administration has a mixed record.

Trump created more manufacturing jobs in the first three years of his term than during the last three of his Democratic predecessor Barack Obama, according to the Labor Department.

He also inked the USMCA agreement, which includes provisions boosting US employment by requiring that nearly half of North American auto production come from higher paid workers, as well as tougher labor clauses that obliged Mexico to reform its laws.

While those measures could eventually bring car factories back to the United States, it hasn't exactly happened so far.

The manufacturing sector now accounts for less than 10 percent of US GDP, and Gregory Daco, chief economist at Oxford Economics, estimates the president's protectionist policies have cost the US economy half a percentage point in growth over two years.

"That's a lot," Daco said, considering that the average US growth rate is two percent.

While the trade deficit with economic rival China narrowed during the Trump presidency, the total deficit rose by 22.8 percent between 2016 and 2019 -- a sign that multinationals have in fact turned to other exporting countries.

Daco said the US shift to becoming a service economy along with the globalization of supply chains is to blame for the struggles to revitalize domestic manufacturing.

"Despite the president's message aimed at making people believe China pays the tariffs on American imports, it is obvious that it is the consumers and companies which bear the burden," he said.

- Spurring debate -

Trump's tariffs have caused revolts in some industries, including steel -- the American Institute For International Steel sued over the levies two years ago in a case that is before the Supreme Court.

The chief executive of a US steel producer who spoke to AFP on condition of anonymity said many steel plants that tried to reopen were too obsolete to survive, and quickly closed back down.

"Trade wars don't help anyone, since both sides just dig in," the executive said.

Gertz pointed to agriculture as another example of what can happen when tariffs go awry.

After agricultural commodity prices crashed in 2018, the government spent tens of billions of dollars to subsidize farmers but bankruptcies nonetheless jumped 20 percent.

"That really hurt the US farming sector. The US responds to that with subsidies to the farming sector, trying to balance that out, and it ends up being a bit of a wash overall," Gertz said.

The "phase one" trade deal signed with China in January this year mandated that Beijing increase purchases of US farm goods.

Gertz said the biggest impact of Trump's policies was giving the business world an unwelcome injection of uncertainty and fueling a 98 percent decline in foreign direct investment between 2016 and 2019, according to the Commerce Department.

"Nobody was ever quite sure about what Trump was going to announce next," Gertz said. 

"That kind of uncertainty is very damaging for businesses. Firms are very reluctant to make investments operating under such policy uncertainty."

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