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Donald Trump's war on China began on the campaign trail.
Donald Trump's war on China began on the campaign trail.
He attracted the votes of middle- and lower-income Americans by addressing the loss of manufacturing jobs in the United States. He said that "China's entrance into the World Trade Organization (WTO) has enabled the greatest job theft in the history of our country" addressing the concerns of many families who have lost their jobs in the diminishing manufacturing industry in the United States.
It is true that the U.S. lost over 5.8 million manufacturing jobs between 1999 and 2011, but Trump has framed the narrative that the majority of those jobs directly unemployed an American and employed a Chinese worker. In reality, it is only 1/6 of those jobs that can be attributed to Chinese imports. The majority of those jobs were displaced because of improvements in technology and the increasing automation of factories in the U.S. The leftover 2/6 of lost jobs were due to imports from other countries.
Because he publicly addressed the trade deficit as a major campaign issue, he was compelled by his voters to follow through on his promises. Thus, his policies to implement tariffs on Chinese goods are greatly supported by the many Americans who believe that China has "stolen" their jobs. In truth, the American economy has been shifting from a manufacturing economy to a service economy and the loss of jobs because of improved technology is part of this process.
Are the tariffs working?
Are the tariffs working?
Regardless of whether or not the U.S. should be in a trade war with China, we are in the midst of it. But, how has this affected both economies? This is a good time to recall the sanctions debate and to note that oftentimes when economic sanctions are established by politicians, they are not in dialogue with economists.
For example, David Lynch describes that Trump had "promised to supercharge economic growth while simultaneously shrinking the chronic U.S. trade deficit. Those promises proved incompatible, as economists had predicted" (Lynch 2019). Many scholars, including economists, critique Trump's strategies and proposals because his promises to increase military expenditure while diminishing the trade deficit are in direct opposition. Ultimately, America's budget cannot handle it.
Additionally, tax decreases spur growth and hiring and lead to consumers having more money to spend. According to Lynch, when Americans have more spending money they are drawn to "foreign-made iPhones, Toyotas, and Heinekens" and when the economy surges, "the Federal Reserve interest rate hikes lifted the dollar, making American exports more expensive" (Lynch 2019). All of this adds to the trade deficit.
How does Trump feel about the deficit?
How does Trump feel about the deficit?
The Trump Administration has emphasized that "trade deficits mean you lose, and surpluses mean you win" (CFR 2019). Trump has taken a hard protectionist stance to bring jobs back to the U.S. from China and to empower the middle- and lower-income workers who voted for him.
The President also utilizes the topic of the trade deficit as evidence for American's economic woes and that the U.S. is being taken advantage of. He promises to fight this and "Make America Great Again." Many economists disagree with this view of a trade deficit instead considering that a healthy economy attracts American consumers to buy foreign goods.
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