Did Trump Win His Trade War?

The data is in, here is what it says...

Did Trump’s global trade offensive work? Trump has long blamed trade for killing American jobs and American prosperity. Specifically, he has accused politicians of making “bad deals” that negatively impact the American economy and sell out the American worker. Now that Trump’s trade wars have been waged for a few years, we can see early glimpses of the impact it is having on the country.

Before we dive in, understand that I am using trade data as measured by the US government of physical goods only. Trump uses this same data to bolster his claim that America is a “victim” of global trade, so this is the data that I am working from. I have long noted that import/export data is an incredibly narrow and misleading statistic to rely on. Trade of non-physical goods, for example, where the US has long run a trade surplus, has been completely ignored by Trump and his advisors. Also, the trade deficit is misleading as many products that are made abroad might use American parts, but are counted solely as imports in trade statistics. In short, Trump’s fixation on the deficit is generally agreed to be a fools errand, but since the administration has made this their benchmark for economic “fairness,” here we are.

Let’s look first at trade with China, Trump’s biggest trade war target and the country with which the US runs its largest “trade deficit.” Trump has placed punitive tariffs (taxes) on goods imported from China since 2018. China has responded with tariffs of its own on American goods. Trump has long contended that China pays these taxes (they don’t, American consumers do) and that the tariffs cause more damage to China than to the US, but does it?

The result: Exports of American-made products to China have dropped every single year since Trump started his trade war, from $130 Billion in 2017 to $106 Billion in 2019, and is on track to further decline this year despite a landmark “trade deal.” Chinese people and companies are still buying products, but they are avoiding American-made goods because of Chinese retaliatory tariffs. To be fair, US imports of Chinese goods are also falling, but from 2017 to 2019, US imports from China fell about 10.5%, while US exports to China fell 18.5%. In other words, America’s exports are being hit harder than China’s are. You might say that America is losing the trade war.

But you might argue… total imports from China have fallen significantly in US dollar terms, even more so than exports to China. That is true, but this is not because the “jobs are coming back", it’s because imports from other countries like India, Vietnam, and Korea are surging in China’s place. In fact, if we look at US trade with the entire world, the overall trade deficit has continued to grow despite Trump levying tariffs on the EU, China, Canada, imports of steel/aluminum, solar panels, washing machines, and signing “better deals” with Korea, Mexico, Canada, and Japan. The total overall trade deficit still swelled from about $735 billion in 2016 (before Trump took office) to $854 billion in 2019, a whopping 16% increase.

Despite tariffs that have pushed many farmers in bankruptcy,forced consumers to pay higher prices for products, and hurt American companies like Harley Davidson, US exports to China are falling and the total US trade deficit is expanding. This would be unfortunate if it weren’t entirely predictable. Any economist worth his salt could have told you that trade policy was unlikely to make much difference with the trade deficit. But alas, real experts are not being listened to in the White House. Case in point, Peter Navarro, Trump’s “China expert” and trade advisor, was hired via an Amazon search. I’m not kidding.

Fun fact: in Navarro’s books and interviews, he cites himself under a fake name as a source to support his own research. I would have gotten expelled from university if I created a fake researcher to support my own thesis, but apparently the only qualification for a White House job these days is unwavering loyalty to dear leader.

Trump’s proclivity to blame external forces for America’s problems are the root cause of poor policy-making. Trade deals never were the primary problem, other countries are not “taking advantage of us.” The problem is here at home. If you want to revive American manufacturing…the government needs to be proactive and invest in America. We need to be encouraging the immigration of the best and brightest to our shores, investing in education in STEM fields, and building the infrastructure of the future that makes America a great place to make things. No longer can we sit on our hands blaming everyone else. It’s time to take responsibility.

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