NDN Blog

Are We Better Off Under Trump? The Short Answer is No

When Donald Trump entered office the American economy had recovered from the Great Recession and just seen two very strong years.  While the economy was very good in Obama’s second term, it was particularly good in 2015-2016 – strong job and wage growth, a booming stock market, low interest rates, low energy prices, a big decline in the uninsured rate, lower than usual health care cost increases, and a rapidly declining annual deficit.   Despite Trump’s “carnage” rhetoric, the economy was in good shape in late 2016 with no real dark clouds on the horizon.

Since assuming office the President aggressively implemented a very different approach than his predecessor on economic and fiscal matters, trade, health care, and many other issues.  Enough time has passed to evaluate whether this new Trumpian approach has worked, and made the good economy he inherited better.   Let’s start with the negative side of the ledger:

Job, wage, and income growth have slowed – In 2015 and 2016, monthly job growth averaged 211,000 jobs under Obama.  Under Trump, monthly job growth has averaged 193,000 jobs, a decline of almost 10%.  

In 2015 and 2016, median household income increased by 5.2% and 3.1%. In 2017 median household income increased by only 1.8%. Similarly, real wages for all workers increased by an annual average of 1.6% in 2015-16.   In 2017-18 they have increased by an average of only 0.5%.    

The annual deficit has exploded - During Obama’s second term, the deficit averaged 3.09% of GDP while under Trump it has averaged 3.66%. Furthermore, the CBO projects that the deficit will surge to 4.6% of GDP in 2019 and 2020. According to a new study, all of that increase stems from Trump’s tax cut, which makes sense given that it is unusual that the deficit would increase significantly while the economy is close to full employment.

Gas prices are rising - The average gas price in 2015 and 2016 was $2.29/gallon.  It rose to $2.42/gallon in 2017 and $2.88/gallon in 2018.  While many factors affect gas prices, the President’s renewed sanctions on Iran have played a significant role in recent increases.

Interest rates are rising -. Since Trump took office the yield on the benchmark 10-yr US Treasury has increased from 2.45% to 3.16%. This 0.71 percentage point (pp) increase compares to a gain of only 0.23pp in Obama’s last two years in office. The rate on a standard 30-year fixed mortgage has increased by 0.58pp under Trump, after increasing only 0.45pp in Obama’s last two years.  

Interest rates and gas prices are at least 25% higher than when Trump took office, making every day things far more expensive for the American people.  Credit card monthly balances, car loans, mortgages, and driving to work all cost significantly more now under Trump.  For those in the middle class and those striving to get there, this is no small thing. 

The trade deficit is widening – The trade deficit averaged $389 billion in Obama’s second term.  In 2017 it hit $449 billion, the largest such deficit since 2008. The 2018 numbers so far are even higher than 2017.    

Tariffs are hurting American businesses and consumers – There is a great deal of data to back this up but we will share just a few of the most important.  In the auto industry, estimates are that Trump’s tariffs on Chinese vehicles and auto parts will increase the price of a typical vehicle by $4,400 and eliminate 715,000 jobs. Farmers, meanwhile, will lose over $12 billion in earnings this year alone as a result of Trump’s trade policies.  Estimates suggest the President’s steel and aluminum tariffs alone will cause the loss of another 179,000 jobs in manufacturing and services. It is little wonder, then, that Trump’s trade policy is historically unpopular, with voters opposing his tariffs 46-28 in Pennsylvania, 41-29 in Missouri, and 47-39 in Wisconsin.

The decline in the uninsured rate has slowed, for some it is increasing now - Under Obama, the uninsured rate steadily declined, with drops of 2.9pp in 2014, 1.3pp in 2015, and 0.3pp in 2016. This progress abruptly stopped under Trump, with the uninsured rate remaining at 8.8% in 2017, representing the first year since 2010 that the uninsured rate had not fallen. Furthermore, 2017 was the first year since 2010 that the uninsured rate gap between those making over $100,000/year and those making under $100,000/year actually increased. In 2017, higher income earners (over $100,000/year) saw a decrease in their uninsured rate by 0.2pp, while lower income earners (under $100,000/year) saw an increase in their uninsured rate by 0.3pp. 

Rising uninsured rates for those struggling to get by will of course also make it far harder to tackle the opioid epidemic. In 2017, over 72,000 people died as a result of the opioid crisis, compared to 64,000 in 2016 and 52,000 in 2015. Meanwhile, evidence suggests that expansion of healthcare access reduces drug overdose deaths.

Even coal production has declined - Even US coal production continues to stay at record-low levels under Trump. During Obama’s second term, annual coal production averaged 903 million short tons.  In 2017 coal production was only 774 million short tons and estimated production in 2018 will be even less, coming in at 741 million short tons.

To be fair, not everything is worse today.  Let’s look at the positive side of the economic ledger:

GDP growth has increased - During Obama’s second term, annual real GDP growth averaged 2.3% (and only 2% in 2015-16). In 2017, however, real growth increased by 2.6% and the CBO projects that it will increase by 3.1% in 2018. As a result, growth under Trump in 2017-18 will average 2.85% compared to the 2.3% it averaged in 2013-16 under Obama.

However, when put into the context of the significant fiscal stimulus that Trump has undertaken, the level of GDP growth we’ve experienced may actually deserve to sit on the negative side of the balance sheet.  The CBO estimates that Trump’s tax cut will increase the federal debt by $1.8 trillion by 2028. They also estimate that the tax cut will increase real GDP by 0.7% by 2028, equal to about $180 billion out of an estimated GDP of $25 trillion. As a result, for every $10 of tax cuts, only $1 of new growth will be created, for a multiplier of only 10%. By contrast, economists estimate that the multiplier for infrastructure spending is closer to 80%.  In other words the stimulus was badly designed and is providing the American people a very low rate of return. 

So while GDP is up a bit under Trump this growth is not providing the kind of across the board benefits we would expect to see – wages and job growth haven’t picked up – and it has come at the cost of the fiscal integrity of the US. 

The stock market has made strong gains, but not as strong as Clinton and Obama - Since Trump took office, the S&P 500 has gained almost 24%, representing wealth creation of over $5.3 trillion. Similar to the increase in GDP growth, however, context makes this metric less impressive. During Obama’s second term in office, the S&P 500 increased by 57%, an average annual increase of 14.3% compared to Trump’s average increase of 13.6%. During Clinton’s second term, furthermore, the S&P 500 increased by 76.5%, an annual increase of 19.1%.

Like with Trump’s growth numbers, the modest increase in the stock market we’ve seen is actually disappointing given that virtually all of the stimulus went to American companies and the investor class. 

So are we better off? Most measures of the US economy are worse today than when Trump took office.  Job, income, and wage growth all have slowed, while costs for everyday things are rising dramatically.   The modest increases we’ve seen in GDP and the stock market have come at an extraordinary cost, as the 2017 tax bill provided a very badly designed and inefficient stimulus which simply isn’t providing the kind of returns the American people should have expected. 

Worse still, the President’s policies have made it very challenging to manage a recession or global economic event if it were to come.  By 2020, the federal deficit will be 4.6% of GDP (compared to 1.1% in 2007 on the eve of the Great Recession), meaning that there will be little room for fiscal stimulus to boost a recovery. Furthermore, our economic and diplomatic relations with the most advanced economies in the world have been frayed through Trump’s aggressive tactics, and his economic team is among the weakest in modern US history.  Finally, Trump’s economic policy has worsened the long-term future of the country. By the time the next presidential term starts in 2021, the CBO estimates that GDP growth will be 1.5% (compared to 2.3% in 2013-16), interest rates on new debt will be 4.1% (compared to 2.1% in 2013-16), and the deficit will be 4.9% of GDP (compared to 3.1% in 2013-16).  

So, are we better off under Trump? Based on our analysis, we think the answer is no.

Challenging Trump's Tariffs - An Ongoing Series

In a new series challenging Trump's tariffs, we argue that the President's trade policy is illegal, recklessly ignorant, damaging to the US economy, and historically unpopular. Congress must step up and rescind the tariffs this fall.

Iowa, Trump, and the Politics of Globalization/Tariffs - 10/12/18 - Trump’s trade policies are hurting the Iowa economy. His tariffs are unpopular there, and his party is performing badly in the fall elections. Some thoughts on what this means for the Democratic presidential race starting soon. 

A Quick Take on NAFTA 2.0 - 10/1/18 - In a new analysis, Chris Taylor argues that NAFTA 2.0 is a largely cosmetic revision to its predecessor that borrows heavily from Obama’s TPP.

Daily Trade Polling Update - 9/28/18 - Recent polling on Trump's tariffs and trade policy. All in one place. Updated daily. 

Whatever Happens With Mexico, Trump’s Trade Policies Are Harmful And Need To Be More Aggressively Challenged - 8/29/18 - In a detailed new analysis, NDN's Chris Taylor explains why Trump's trade policies are harming the US, and need to be more aggressively challenged.

Trump's Tariffs Will Do Lasting Economic Damage If Not Opposed - 8/14/18 - Trump's trade policy is enacting large costs onto average American workers that will be felt for generations. Congress must act to rescind these tariffs, before US manufacturers and farmers permanently lose out on much of global consumer demand. 

On Tariffs, Trump's Reckless Ignorance Can No Longer Go Unchallenged - 8/8/18 - To a shocking degree, Trump doesn't understand how trade and tariffs work - and they are illegal to boot. Congress should rescind them this fall.

Trump's Tariffs Are Illegal, And Should Be Rescinded - 8/3/18 - Trump’s trade war uses the false pretense of “national security” to sidestep the checks and balances of the legislative branch. Independent of their ideological position on trade, Congress must stand up to this creeping authoritarianism.

Related readings:

Democrats Need To Have A Big Conversation About Trade - 5/16/18 - Recent Pew polls show Democratic voters are overwhelmingly supportive of free trade. Simon takes a look at what this means for the Party.

Trump's Iran Deal Withdrawal is an Arrogant Rejection of the Postwar System America Built - 5/10/18 - In a new column, Simon says Congress must begin debating Trump’s sustained effort to undermine the post WWII order. 

An Enduring Legacy: The Democratic Party and Free and Open Trade - 1/21/14 - The global system created by Presidents FDR and Truman has done more to create opportunity, reduce poverty and advance democracy than perhaps any other policies in history. 

Iowa, Trump, and Politics of Globalization/Tariffs

(This is the seventh article in a series produced by NDN challenging Trump’s tariffs)

From 2012 to 2016, Iowa shifted a net 15 percentage points from Obama to Trump, the largest such shift of any state in the nation. As we look to the upcoming midterms, however, the politics of the state seem to have changed significantly. Similar to the other Midwestern states, the Republican Party seems to be taking a hit, and the House and Gubernatorial races in Iowa appear to be strong pick-up opportunities for Democrats. We don’t know exactly why this shift has occurred, but part of the reason seems to be trade. And for good reason. NDN sees three major motivations for why Iowans would oppose Trump’s protectionist trade policies.

Globalization has greatly benefited Iowa

The new era of globalization that began in 1989 and saw the US become more economically integrated with China, Mexico, Canada, and the EU (among others) has been very good for Iowans. The state exported $13.2 billion in 2017, or 7% of its GDP, and foreign trade supported 450,000 jobs, equal to 20% of all jobs in the state. Rather than experience a decline, trade-related jobs actually grew 4.5 times faster than total employment in Iowa in 2004-2014. Furthermore, the trade deals that the President has slammed the most, the original NAFTA and agreements with China and the EU, have provided the most jobs in the state. Canada is the market for 31% of Iowa’s exports, while Mexico accounts for 17%, China 4%, and Germany 3%.

The result of this global integration has been a very strong economy. From 2011 to 2017, Iowa’s GDP per capita increased by 11.3%, faster than the 8.3% registered by the country as a whole. Furthermore, the state’s current unemployment rate is 2nd lowest in the nation at 2.5%, significantly lower than the 3.7% national unemployment rate and the 4% rate that economists consider to be full employment. Finally, Iowa continues to be a national leader in poverty reduction, having the 7th lowest poverty rate in the country at 9.4% in 2017, compared to a national average of 12.5%. While Trump constantly speaks of trade creating economic “carnage” across the nation, Iowa instead has developed a prosperous economy on the back of foreign integration. In fact, Iowa has a large trade surplus of $4.2 billion, further illustrating that foreign competitors haven’t overwhelmed Iowan industry but rather have complemented it.

Trump’s trade policy has damaged the state’s economy

Trump’s trade wars have caused serious disruption to Iowa’s economy, and risk causing an outright recession in the state if continued. Retaliatory tariffs on Iowa’s major exports, in response to Trump’s imposition of wide-ranging tariffs, have significantly reduced demand for those exports, resulting in large declines in the prices received by farmers and workers throughout the state. Soybeans, responsible for 24% of Iowa’s exports, have seen their price decline by 16% in 2018 alone. Pork and corn, responsible for 15% and 13% of total exports, have seen their prices decline by 15%. The overall result has been a large decline in income earned by exporters throughout the state. A new study from Iowa State University estimates that the trade wars could cause an overall income decline of $2.2 billion in Iowa, equal to 1.2% of the state’s GDP. Even the Trump administration has admitted its policies are harming incomes across the state, as it has already provided almost $550 million in bailouts to farmers hurt by the tariffs.

While Trump has touted the new NAFTA agreement as a breakthrough for Iowa’s farmers, new market access to the Canadian dairy market totals only $70 million for all US exporters, an insignificant amount given losses of up to $40 billion to American exporters as a whole. Furthermore, the loss of foreign market access by Iowan workers is not likely to be short-term in nature, regardless of when the trade war is ended. Major competitors to Iowan farmers, predominately Brazil and Canada, are taking advantage of tariffs on US exports to take market share from Iowans. Brazilian soybean exports to China have jumped 22% in 2018 alone, as exports from Iowa dry up. As a result, even if the tariffs are rescinded, supply chains will have refocused to exclude American, and Iowan, exporters for the long run.

Iowans recognize these facts and strongly oppose Trump’s tariffs

Iowans heavily oppose Trump’s trade policy in state-wide polling, and have punished Republican incumbents running in the state. Republican incumbents in the 1st and 3rd House Districts are trailing their Democratic opponents while running 22 and 15 points behind their own 2016 performances, while the incumbent Republican Governor is also losing while running 26 points behind the GOP’s performance in the 2014 governor’s race. This follows a clear trend, previously discussed by my colleague Simon Rosenberg, of Trump significantly underperforming his 2016 numbers throughout the Midwest.

While we don’t know the exact causal effect of the tariffs on this shift, it has to be noted that Trump’s trade policy is significantly underwater in the state. Across Iowa as a whole in September, 52% of likely voters thought that Trump’s tariffs would be bad for Iowa’s economy while only 24% said they would be good.  In the key battleground district of Iowa 1, meanwhile, likely voters opposed Trump’s tariffs on steel and aluminum by a 55-36 margin. This follows other polling in the region that found Trump’s tariffs opposed 41-26 in Missouri, 46-28 in Pennsylvania, and 57-31 in Wisconsin. Even though Iowans swung so strongly towards Trump in 2016, they realize the positive impact of foreign trade on the state, and are unwilling to support Trump’s reckless trade policies.

Looking ahead to the 2020 Democratic primary in Iowa

The economic and political realities described here raise some interesting questions about how the Democratic presidential candidates are going to address these issues in the coming months. The state’s direct ties to foreign trade, the significant decline in Iowan agricultural exports as a result of Trump’s tariffs, and their unpopularity will make it very difficult for Democrats to embrace Trump’s tariff and trade policies, something Democrats have done in some states this year. In fact, it would be appear, based on this analysis, that it would benefit Democrats to clearly attack the tariffs as policies hurting everyday Iowans. 

How Democrats play the trade issue in the Presidential race next year will be fascinating to watch. Democratic voters overwhelmingly support free trade. Trump’s economic policies, including his tariff policies, are weakening both the US and global economies. His protectionist policies are deeply unpopular, and his party is about to suffer huge losses in the Rustbelt and Midwest. Given all this, the Democratic presidential candidates would be smart to study these issues hard, and make sure they don’t somehow align themselves with policies which are contributing to the unraveling of the strong recovery Trump inherited and which are doing direct harm to American businesses and workers across the country. 

18 Days Out - Some Thoughts on the 2018 Election

This analysis was originally posted on Friday, October 12th.  It will be updated as things warrant over the final few weeks of the election.  Last update - Thursday, 10/18, 7am. 

National Landscape Still Favors Democrats – Looking back it appears the Kavanaugh nomination fight gave the Rs a bit of a bump during the event, but since things have trended a bit Democratic.  Using 538, Dems picked up in both the generic (+9) and Trump approval (-9/-10/-11) and their likelihood of winning the House also increased.  So Kavanaugh did not fundamentally alter the pro-Democratic lean of the election - perhaps why we are are seeing a frenetic Trumpian media barrage now.  A new ABC/Washington Post poll released Friday afternoon confirmed that Kavanaugh remains too unpopular to have given the Rs any kind of sustained lift. 

We are however seeing a bit of erosion in the Senate for Democrats.  Both TN and ND seem to be slipping away, and a few other races have seen slippage in some – emphasize some – polls.  Using 538 Dems still lead in AZ, FL and MO, and only trail in NV by a point or so in a state not easy to poll.  If Dems can prevail in all four of these races the Senate on election day will be 50-49 for the Dems, with MS2 determining control in a December run-off.  So things may be a bit closer in the Senate than convetional wisdom holds right now.     

2 new polls find vote intent from episodic or new voters higher than recent midterms.  This new one from Tufts' Tisch College finds vote intent among 18-24 year olds at President levels; this new one from ABC/Washington Post finds "enthusiasm is up across almost all demographic groups, but the increases are greater among younger adults, nonwhite voters and those who say they favor Democrats for the House."  Not taking anything for granted the DCCC has launched what appears to be a very smart late campaign to talk to these new and episodic voters.  All of us will be watching on election night to see what happens. 

Trump/GOP Weakness in the Rustbelt, Midwest, 2020 States – We’ve been banging on this one for the last few weeks and it finally started getting greater pickup this week – see these pieces in the Washington Post, another WaPo, ABCNews, NBC News, Buzzfeed and the New York Times.   Using Real Clear Politics, we see the following:

GOP struggling in battleground governors races – At this point GOP candidates do not have a lead outside of the margin of error in FL, GA, PA, OH, MN, MI, WI, IA and NV, and only lead in a single one of these states, GA, by 2 points.  While many of these races are close Dems have huge leads in MI/MN/PA.  Omnious development for Trump and the GOP.  

GOP Rustbelt wipeout - All 8 of GOP Sen/Gov candidates in MI, OH, PA, WI are trailing. 6 of these 8 are trailing by double digits, 5 are in the 30s (!).  Right now Rs trailing in every competitive statewide race in IA, WI, IN, MN, MI, OH and PA.  It is our belief that part of what is driving this newfound GOP weakness is the unpopularity of Trump’s tariffs, which remain among the most unpopular of all Trump’s policy initiatives. 

The political failure of both Trump's tariffs, and the GOP in the rustbelt/midwest remains in our mind one of the biggest stories this cycle, and one which 2020 Democrats should be studying very carefully.   NDN's Chris Taylor has a smart, new piece diving a bit deeper into this important dynamic. 

The Democratic Party Will Be Changed By This Election - Given the impact Trump's new brand of politics is having on the nation, it should be expected that Democrats running and winning in this environment will feel different from the Democrats already here in DC.  Feel like we are going to see a few types of Democrats emerge next year which will help guild ad shape the party for years to come.  First will be all the women who come, and who will have been elected in a year with an historic gender gap.  Practical impact will be to make reproductive health and other "women's issues" key priorities and deliverables next year; and of course it signals a far larger cultural and political shift which will become clearer over time. 

Next will be a very large group of veterans and former national security officials.  Joining current Members like Seth Moulton, Stephanie Murphy, Conor Lamb and Ruben Gallego, this group could become a deeply consequential one, forging American foreign and security policy for decades to come.  To me this group feels like a vein of Democrat we haven't seen in a long time; a pre Vietnam War Democrat, a WW II and Cold War Dem, pragmatic patriots, similar to the class full of veterans which came in 1946 after the war.  NDN has been writing and speaking about the Democratic Party's very real opportunity to reclaim "patriotism" for many months now; and am pleased to be quoted about this call in a smart new piece by Ron Brownstein in CNN. 

Third are the Democratic Socialists.  While there is no doubt this new sensibility has resonance in the center-left family, it remains to be seen how powerful it will be next year.  This movement has a compelling, emerging champion in future Rep. Ocasio-Cortez but there just aren't that many candidates running this cycle with this label as their primary affiliation.  The first two groups - women and the national secrurity Dems - will likely be larger much larger in number in the Democratic Senate and House next year.  Regardless of numbers, expect this new post-Bernie tribe to be loud and influential. 

While some of these new Members will get absorbed into existing groups like the New Dems, Blue Dogs, Future Forum, Hispanic/Black/AAPI Caucuses, my sense is that this class is going to be so large and its sensibilities new enough that it will itself become a force perhaps equal to any of these existing factions.  Will be fascinating to watch. 

And watch this new video which brings together, powerfully, two of these trends - women and national security experience.  Hard to watch this and not sense the emergence of a new post-Clinton, post-Obama Democratic Party. 

$38 million for Beto – The big dollars we are seeing Dems raise this cycle isn’t just about anti-Trump sentiment, it is about Dems succeeding in a new, always on media and information landscape.   This election cycle will be the first where more Americans got their news from the Internet than television.  And whereas the broadcast era of politics was about raising money to put on tv in the last few weeks of a race, the new politics of the digital age requires candidates to be generating interest/making connections every day.   Beto was not a likely candidate to raise all this money.  He was unknown, from a small and distant Texas media market, and has never led in the polls.  But what he has created is perpetual, compelling values-driven digital media – viral videos, social media checkins; and he has used the rally format Trump used to build his lists and grow a powerful support network. It is a model all Democrats should study and learn from. 

While not at the same scale, the DCCC made a commitment early in 2017 to ensure its candidates used modern internet based fundraising techniques – think Dean, Obama – to give them a shot to tap into the energy out there.  And as this story in the Washington Monthly suggests, it worked.   The Democrat’s well funded candidates have been instrumental in giving the Democrats a real shot at winning the House; but by expanding the battlefield to twice as many races as the Democrats competed in in 2016, it has also lessened the extraordinary GOP fundraising advantage this cycle.  See this new tweet from Nate Silver for more data on just how extraordinarily successful this strategy has been. 

I will have more to say in the coming days about the struggle Democrats have had in transitioning to an "always on" post-television media era, an era of Trump, social media and a 24/7/365 debate about our future. But one area I've grown concerned about is whose job is it exactly in the center-left ecosystem to take on Trump directly, both in the final days of the election and next year? Imagine if $50m had been directed against him in recent months.....do we really believe he would be at 42% approval given what is known? And would have it made a difference in the coming elections? Of course it would have.  No candidate in modern American history has developed a more powerful set of negative things to be used against them as Donald Trump has.  Time now for voters to be reminded of them.  It's the basic blocking and tackling of politics now, something I address in this new thread.

This issue of the Democratic Party's understanding (or lack of) of the modern media landscape was at the core of debate over the debates in 2015-2016.  At the end of the day a badly designed debate schedule allowed the GOP candidates to be seen by 100 million peple than the Democratic candidates.  In the fall of 2015 I wrote: "Regardless of the virtue of the original DNC debate strategy, the RNC has produced a far better approach that will guarantee their candidates hundreds of millions of more impressions.  This gap is so large that it could sway the outcome of a very close race, and the DNC should take steps to close this gap in the weeks ahead."  Something it never really did. 

The Washington Post's Michael Scherer quotes this portion of my analysis in a new story about the RNC and its 2019 strategy. 

More - If interested feel free to review my 2014 post-election analysis, "A Wake-Up Call for Democrats," and the one from 2016, "A Generation of Democrats Will Have to Rise." I am also proud to be the only two time winner of The Hill's Election Prediction contest, and look forward to competing again this year. 

Behind a Record Unemployment Rate, Warning Signs for Job Growth

In September, the labor market had many of the signs of a booming economy. The unemployment rate broke a 49-year record by falling to 3.7%, while weekly jobless claims also surpassed a 49-year record by hitting 201,000. However, much less attention has been paid to the continued poor performance of two alternative metrics: the labor force participation rate and the employment-to-population ratio.

In September, prime-age labor force participation declined for a 2nd straight month, meaning that participation is actually at a lower level today than in December 2017 (and at the same level as in September 2017). Furthermore, the prime-age employment-to-population ratio remained the same this month after a decline in August, and it is now at the same level that it was in February 2018.

What are we to make of the conflicting stories offered by these metrics? Importantly, the unemployment rate and jobless claims ignore workers who are outside of the labor force, while the labor force participation rate doesn’t take into account those workers inside the labor force. The employment-to-population rate, by contrast, includes workers both inside and outside of the labor force, and is thus the most complete metric to use.

Behind a record-breaking unemployment rate, therefore, a better metric of the labor market (the prime age employment-population rate) shows job growth that has declined in recent months, and has shown no improvement since February. This is especially important because since January, the Trump administration has undertaken an enormous fiscal stimulus program unprecedented in the post-WW2 era. The fact that this stimulus has achieved essentially no progress in the labor market suggests warning signs for job growth going forward.

The most likely explanation for this slowing of job growth in the midst of significant stimulus is that the US labor market is currently at full employment, and was there in late 2017. This represents a searing indictment of the dishonesty of the Trump administration, which sold its tax cuts as necessary to jumpstart a weak economy. Not only have they not done so, but the job market in December was close to as strong as it is today.  

Quick Take on NAFTA 2.0

This is the sixth article in a series produced by NDN challenging Trump’s tariffs.

Last night, negotiators from the US and Canada unveiled an agreement that would include Canada in the already announced US-Mexico trade deal, thereby setting the stage for the passage of a revised NAFTA deal within a few months. Trump was quick to herald the “historic” deal but similar to the agreement with Mexico (and that with South Korea signed last week), the agreement fundamentally keeps NAFTA the same and adds in only a few cosmetic changes. The following are NDN’s three major takeaways from the deal.

The deal is largely cosmetic

The deal with Canada is exceptionally narrow, and affects only small parts of either country’s economy. The major update concerns Canada’s agreement to eliminate a subsidy program for milk products (called Class 7 milk), thus opening the Canadian dairy market to US farmers. However, milk products account for only $364 million in US-Canada trade, or 0.06% of total cross-border trade. Further, the deal gives US farmers access to 3.6% of the Canadian dairy market, compared to 3.25% given under the TPP. In total, therefore, US farmers will have access to $66 million in greater export opportunities. By comparison, from 2017 to 2018 American farmers saw a decline in income of $12.5 billion as a result of Chinese retaliation to Trump’s tariffs, or 190x the increase in export opportunities from this deal and 34x the size of the entire dairy trade between the US and Canada. Furthermore, the large varieties of other protectionist measures that both countries use to protect their dairy farmers remain in place. Indeed, the Class 7 milk program was only first implemented in spring 2017, meaning that US dairy exporters now face the same level of Canadian protection as they did when Trump took office in January 2017.

The two other major parts of the deal – a 16-yr sunset clause and the retention of the Chapter 19 dispute resolution mechanism – actually keep NAFTA more of the same. The 16-yr sunset clause (significantly longer than the 6-yr one Trump wanted) pushes another re-negotiation a long way down the road, while the Chapter 19 mechanism (which was in the 1994 NAFTA agreement) allows Canada to more successfully challenge US anti-dumping tariffs on lumber and other products. This narrowness is comparable to the small impact of the US-Mexico deal agreed to last month. The major change in that deal, a revision to rules of origin for autos, is likely to impact only 1-in-10 Mexican car exports to the US through its North American content requirement and 1-in-3 through its wage requirement. Even that likely won’t affect the structure of production because automakers can simply accept a 2.5% MFN tariff outside of NAFTA if their costs increase by more than that 2.5% amount.

The agreement is slightly pro-free trade

The deal with Canada is actually pro-free trade in nature (to the extent that it changes anything), in major contrast to Trump’s arguments that more trade destroys jobs. The Class 7 milk subsidy was a protectionist measure by Canada that reduced trade flows, so its abolition will lead to larger cross-border trade. Likewise, the US concession to keep the Chapter 17 dispute resolution mechanism makes it harder for Trump to impose tariffs on Canadian lumber and other goods in the future – another win for free trade. Finally, another US concession in the deal granted Canada 2.6 million tariff-free car exports in the event that Trump enacted a blanket tariff on car imports. Given that current Canadian car exports to the US are 1.8 million cars, this means that Canada will not be affected by a potential car tariff. This pro-trade axis contrasts slightly with the US-Mexico deal, which de facto imposed a small tariff on Mexican autos and auto parts. However, this tariff would affect only 1-in-3 Mexican autos and at maximum at a 2.5% rate, so the overall level of protectionism in the US-Mexico-Canada deal is likely a wash or negative. One thing still to be seen is the fate of Trump’s steel and aluminum tariffs on Canada and Mexico, which have not been repealed as part of this agreement.

The deal is a less ambitious version of the TPP

The deal with Canada is largely an application of clauses from the TPP (that included Canada, Mexico, and the US), a deal that Trump bitterly opposed and withdrew from in early 2017. More than two-thirds of the chapters of the new deal can be traced to the TPP, and almost all of the market access in the new deal was granted in the TPP as well. For US dairy exporters, the new NAFTA expands access to Canada’s dairy market by only 0.35% more than the TPP, while the dispute resolution mechanism and intellectual property chapters are largely carried over from the earlier trade deal. Similarly, the US-Mexico deal would at a maximum affect $10 billion in Mexican auto exports, while the TPP actually opened up market access for $90 billion in US auto exports. As a result, this deal can largely be seen as a re-application of the already negotiated TPP, but with less ambitious liberalization that does less for US exporters. While the TPP reduced tariffs on 18,000 US products and simplified regulatory barriers in dozens of industries, this deal mostly affects only the dairy and auto industries.

Overall, therefore, NAFTA 2.0 is largely the same as NAFTA 1.0 and the TPP that re-negotiated it. This stands in significant contrast to the explosive rhetoric used by Trump (i.e. threatening to tariff Canada’s auto exports at a 25% rate and calling NAFTA “the worst deal ever made”). Why then would Trump agree to it? For one, Trump himself doesn’t care about the specifics of trade deals as long as he’s able to claim them as a “win.” But secondly, Trump and his advisors must have realized that his trade policy is enacting devastating consequences on farmers and manufacturers across the country, and is widely unpopular especially in important midterm battlegrounds like Iowa and Kansas. Facing this pressure and worried about a blue wave in November, he may have been willing to cut his losses and simply embellish whatever deal he could get.

A Snapshot of Current Polling

Earlier today, Simon wrote an important thread that took a look at current polling in the midst of the Kavanaugh confirmation hearings. The thread is here, and an expanded version is below.

A Snapshot of Current Polling

According to FiveThirtyEight over the last few weeks, Trump's favorables have improved a bit and now are at 41.5/52.8 but the generic has worsened for the Republicans and now stands at 49.6/40.9. Both of these results suggest a very good year for the Democrats. My take is that Republicans now have a very low ceiling across the country. Of the 45 top Gov/Senate/House battlegrounds with recent polls, Republicans are over 50% in only 4 or 5 (not including TX Sen or AZ Gov), and have no lead outside of the margin of error in any Gov or Sen battleground. Republicans are not leading in governor's races in FL, GA, OH, PA, MI, WI, IA and NV - all critical 2020 battlegrounds. They could end up winning some but the GOP can't be happy here.

Furthermore, the GOP wipeout in MI and PA deserves far more attention. 4 GOP candidates for MI and PA Gov and Senate are in the 30s. The 30s. Democrats are likely to win these races by 15-25 points in two of Trump's most important states. The very strong showing of Dems in AZ, CA and TX continues a trend we first saw in 2016 - Trumpism is not playing well in this region of the country. There are also very good numbers for Democrats in CO, NM, NV. Keep an eye on this.

Next, the House. According to the Cook Political Report, Democrats are on track to clearly win 205 seats, and need to win 13 of the remaining 57 Toss Up/Lean Rs seats to flip the House. In Nate Cohn's latest polling of 30 of these districts, Democrats have leads outside of the margin of error in 9 races, while Republicans have those leads in only 5. Republicans are at 45% or below in 9 additional races. So Democrats have 9 clear leads and are outperforming Republicans in another 9 races in a lean Democrat year, while Republicans only have 5 clear leads. Being generous, let's say the parties split those 57 districts. The result would be the Democrats ending up with about 230 seats.

But to be very clear - Democrats do not have this thing in the bag. It is leaning their way. But most competitive races for Gov/Sen/House are too close to call, so any late swing either way could be very meaningful. This is why the shakeout on this Kavanaugh fiasco matters so much.

Daily Trade Polling Update

A few weeks ago, Simon wrote a memo outlining the current state of polling on Trump’s tariffs and trade policy more generally. We have decided to turn this into a live document that will be updated as new polls come out. Feel free to come back and check the most recent polling on this important issue.

This Daily Trade Polling Update is part of a new series produced by NDN challenging Trump’s tariffs.

National Polling

Free trade continues to remain remarkably popular in national polling. The August NBC/WSJ poll (pp 20) asked “In general, do you think that free trade between the United States and foreign countries has helped the United States, has hurt the United States, or has not made much of a difference either way?” 50% said helped, only 23% said hurt. A September Pew poll found similar numbers with 74% saying that trade with other countries is good for the US, compared to only 21% who said it was bad. A June Monmouth poll found 52% believing free trade agreements between the US and other countries were good for the US, only 14% disagreed. Finally, a September poll from the Chicago Council found that the highest percentages ever registered in the survey (since 2004) say that trade is good for the US economy (82%), good for consumers like you (85%), and good for creating jobs in the U.S. (67%).

In addition, Trump’s protectionist trade policies are widely unpopular nationwide. The July NBC/WSJ poll asked about Trump’s tariffs — 25% said they would help the economy, 49% said hurt. An August Monmouth poll found that 38% thought Trump’s tariffs would hurt the economy, compared to 28% who thought it would help it. An August poll from ABC/Washington Post found a similar 41/50 split on Trump’s tariffs. In an April Quinnipiac poll, a whopping 68% said a trade war with China would be bad for the US economy. Only 22% said good. A June Suffolk poll found only 35% support for the NAFTA renegotiation, and a June CBS poll found support for tariffs on Canada to be only 27% (62% disapprove). In a June CNN poll, 63% said it was better for the US to maintain relations with our close allies rather than impose tariffs. Only 25% said tariffs were better. Finally, the September Chicago Council poll found support for NAFTA at its highest level yet (63%), and a majority (61%) supports US participation in the revised Pacific trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Seven in ten are concerned that a trade war with China will hurt their local economy; while just over half are concerned about the impact of a trade war with Mexico.

In polls which broke out the numbers by party, an overwhelming majority of Democrats come out in favor of free trade and against tariffs. In the April Pew poll, 67% of Democrats said free trade was a good thing, just 19% said bad. 63% opposed the tariffs, just 22% supported. Furthermore, in the August ABC/Washington Post poll, which found support of Trump’s tariffs to be at 41% support/50% opposed, Democrats opposed them 75% to 18%.

State Polling

Polling of individual states has found a remarkably similar pro-trade trend, particularly in the Rust Belt that supposedly opposed globalization the most.  A series of Marist/NBC polls found support of the tariffs to be 23/42 in IL, 29/41 in MO, 28/46 in PA and 33/40 in Texas (links here and here). A recent Suffolk University poll (pp 22–23) of Wisconsin found support for the tariffs on China to be 39/47, and on “EU, Canada and Mexico” 31/57. That the popularity of a major Trump policy initiative is under 33% in states like Missouri, Pennsylvania and Texas is pretty remarkable.

House Polling

Trump’s tariffs are also significantly underwater in some of the most heavily-contested House districts ahead of the midterm elections, using data from the New York Times’ live polling project. In Iowa’s 1st district (which went Republican by 7.6 points in 2016), support for NAFTA is at 59%, compared to only 29% in opposition. Further, 55% oppose Trump’s steel and aluminum tariffs, compared to 36% in support. In California’s 49th district (R+0.6 in 2016), 63% support NAFTA and 22% oppose, while 53% oppose the steel and aluminum tariffs and only 33% support them. In Texas’ 32nd district (which didn’t even have a Democratic House candidate in 2016), 61% support NAFTA compared to 28% who oppose it, while 50% oppose the steel and aluminum tariffs and only 39% support them. Finally, in Kansas’ 3rd district (R+10.7 in 2016), 60% support NAFTA and 27% oppose it, while 56% oppose the steel/aluminum tariffs and 34% support them.

In each of these districts, furthermore, significant opposition to Trump’s trade policies has accompanied a large shift towards the Democratic candidate. While each district voted Republican in 2016, Democrats leads by 15 points in Iowa 1, 10 points in California 49, and 8 points in Kansas 3, and trail by 1 point in Texas 32.

Support for Open Trade Remains Robust in Recent Polling. Trump’s Tariffs Still Remarkably Unpopular.

This is the fifth article in a series produced by NDN challenging Trump’s tariffs.

Given the conventional wisdom about how Trump won the Presidency in 2016, one would expect to find broad support for his protectionist trade policies and his tariffs in particular. A review of recent polling, however, suggests the American people are far more supportive of open trade policies and less supportive of tariffs than many would have expected. In fact, by some measures, Trump’s tariffs are among the least popular policy initiatives of his Presidency.

Using the Polling Report site as reference, let’s look at some data. The August NBC/WSJ poll asked “In general, do you think that free trade between the United States and foreign countries has helped the United States, has hurt the United States, or has not made much of a difference either way?” 50% said helped, only 23% said hurt. A July version of that poll asked about Trump’s tariffs — 25% said they would help the economy, 49% said hurt. An April Pew poll found similar numbers with 56% saying free trade was a good thing for the US and only 30% saying it was bad. A June Monmouth poll found 52% believing free trade agreements between the US and other countries were good for the US, only 14% disagreed. A March edition of the NBC/WSJ poll asked the question a slightly different way: “What do you think foreign trade means for America? Do you see foreign trade more as an opportunity for economic growth through increased U.S. exports, or a threat to the economy from foreign imports?” 66% said opportunity for growth, only 20% said threat.

Summer polls from Pew and Quinnipiac found slightly better but still net negative spreads for Trump on tariffs and free trade (39/50, 40/49). The new ABC/Washington Post poll out this week found a similar 41/50 split on Trump’s tariffs. In the Quinnipiac poll, however, a whopping 73% said a trade war would be bad for the US economy. Only 17% said good. A June Suffolk poll found only 35% support for the NAFTA renegotiation, and a June CBS poll found support for tariffs on Canada to be only 27% (62% disapprove). In a June CNN poll, 63% said it was better for the US to maintain relations with our close allies rather than impose tariffs. Only 25% said tariffs were better.

In polls which broke out the numbers by party, an overwhelming majority of Democrats come out in favor of free trade and against tariffs. Two examples. In the spring Pew poll, 67% of Democrats said free trade was a good thing, just 19% said bad. 63% opposed the tariffs, just 22% supported. In the new ABC/Washington Post poll, which found support of Trump’s tariffs to be at 41% support/50% opposed, Democrats opposed them 75% to 18%.

Recent state polls have similar findings. A series of Marist/NBC polls found support of the tariffs to be 23/42 in IL, 29/41 in MO, 28/46 in PA and 33/40 in Texas (links here and here). A recent Suffolk University poll (pp 22–23) of Wisconsin found support for the tariffs on China to be 39/47, and on “EU, Canada and Mexico” 31/57. That the popularity of a major Trump policy initiative is under 33% in states like Missouri, Pennsylvania and Texas is pretty remarkable.

While trade is obviously a complicated and tough issue, the idea that there is broad support in the US for protectionist policies, and tariffs in particular, just can’t be supported given this data. Trump has failed to persuade the American people to get behind his trade wars, and in fact, the Pew data suggests more people today are supporting the basic notion that free trade is good than a year ago. Early in his Presidency, Trump’s trade policies have generated more of a backlash than a groundswell of support.

As we’ve written elsewhere, Democrats would be smart to study this data and do some polling and market research of their own. Putting it all together suggests that an extended campaign by Democrats calling on Trump to rescind his tariffs — like the one NDN has been calling for — would not only be smart policy and good for the US economy, but smart politics too.

Update, 9/6/18 — new poll from Chicago Council found even higher levels of support for trade and NAFTA. A summary of its key findings:

  • The highest percentages ever registered in this survey (since 2004) say that trade is good for the US economy (82%), good for consumers like you (85%), and good for creating jobs in the U.S. (67%).
  • Support for NAFTA is also at its highest level yet (63%), and a majority (61%) supports US participation in the revised Pacific trade agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
  • Democrats express the most favorable views of these two trade agreements, while majorities of Independents now also support them. Although Republicans as a group tend to oppose them, a majority of non-Trump Republicans — those with only a somewhat favorable or an unfavorable view of the president — support them, demonstrating splits within the party faithful.
  • Seven in ten are concerned that a trade war with China will hurt their local economy; while just over half are concerned about the impact of a trade war with Mexico. In both cases, trade wars are a greater concern for Democrats.

Whatever Happens With Mexico, Trump’s Trade Policies Are Harmful And Need To Be More Aggressively Challenged

(This is the fourth essay in a series challenging Trump’s tariffs)

Trump’s trade policy has been centered on a simple trade-off for American workers – experience some hardship in the short-term in return for expanded opportunity in the long-term. So far, the President has kept his promise on the first of those items, as American farmers and manufacturers have been hit hard by retaliatory tariffs, increasingly costly production inputs, and weaker investment into the country. The promised long-term benefits, however, appear as elusive as ever. The three major trade negotiations with the EU, Canada/Mexico, and China have delivered little in the way of solid agreements, and actually serve as a retreat from the more ambitious trade liberalization of the TPP and TTIP talks. Furthermore, American workers are likely to permanently lose many of their foreign consumer bases if the trade policy remains in place, regardless of the results of the trade negotiations. While American workers are struggling today, they are likely to become internationally uncompetitive in the future if Congress doesn’t act to reject Trump’s trade policy.

Trade negotiations have produced little of consequence

Trump’s trade negotiations on three fronts have led to minimal, if any, steps towards increased trade liberalization and US access to foreign export markets. Of the three trade deals, the Trump administration has made the most “progress” in the NAFTA re-negotiations with Mexico and Canada, but even here a binding deal has not been made and the future of the preliminary agreement between Mexico and the US announced earlier this week seems in doubt. This is because Canada, despite the statements from the President, needs to ratify any deal for it to have a chance of success. First, Mexico has stated that they want Canadian involvement for any new deal to go through, and indeed, the optics of the current Mexican president (whose PRI party undoubtedly wants to remain politically competitive after he leaves office) bowing to Trump’s bullying while Canada resists would be politically devastating in a country heavily opposed to Trump. Second, a bilateral deal excluding Canada would almost certainly fail in Congress, as it would represent a significant imposition of tariffs on America’s closest ally and trade partner and would destroy millions of American jobs. As a result, the fact that Canada has not been part of the negotiations since July 1st, and would need to ratify all changes by this Friday in order to pass a deal before the December 1st inauguration of Mexico’s new president, puts a re-negotiation in doubt. Furthermore, significant differences on revisions to the trade deal still exist between Canada and the US, such as an American demand to loosen rules for enacting anti-dumping subsidies and strengthened intellectual property protections. This, combined with enormous Canadian public opposition to Trump, makes a quick concession by Canada this week unlikely, putting the entire negotiations at risk.

Even if a deal were to pass in the spirit of the Mexico-US preliminary deal, however, the long-term gains would be less than those of the TPP (which included Canada, Mexico, and the US) that Trump dismantled when he entered office. In terms of tariff liberalization, the TPP eliminated tariffs on 18,000 products worth $90 billion in US exports, whereas the Mexico-US deal does little to change tariff policy. Furthermore, the environmental, labor, and IP protections of the TPP all are stronger than those in this NAFTA deal. Indeed, the major change in the new deal from the original NAFTA agreement is a revision to the Rules of Origin provision, which under the new deal would require imported goods to have a greater amount of North American-produced content. Importantly, this provision isn’t liberalization at all, but instead acts to increase the cost of imported goods in an identical way as a tariff would. Furthermore, this provision would impose significant costs onto foreign producers, who would likely exit the NAFTA import rules and simply accept a 2.5% MFN import tariff instead. Finally, it is unclear how impactful this change in auto rules would even be for the US economy. One Bloomberg report argues that only 3 car models out of the 40 currently exported from Mexico to the US would be affected by the increase in North American content requirement, and less than one-third of cars exported from Mexico to the US would be affected by changes to wage requirements. What does this new deal, that has a questionable chance of being ratified in the first place, actually do then? It enacts liberalization that is far less ambitious than the TPP, and its major revision actually imposes additional barriers on foreign trade with the US. Further, some reports suggest that the US is requesting use of Section 232 (national security) tariffs on Mexican autos if they don’t meet the new requirements, rather than the existing 2.5% MFN rate. This arbitrary, illegal use of Presidential power would further weaken the global trading system, and our relations with Mexico, and must be knocked out as negotiations proceed.

Negotiations on NAFTA have been slow and likely counterproductive to trade liberalization, but those with the EU have been even more stagnant. After meeting with European Commission President Juncker on July 25, Trump was quick to announce that the EU had made major trade concessions and that a deal was imminent. Instead, it turned out that the EU had simply agreed to begin talks on tariff reduction, something that had already begun under the TTIP framework that Trump dismantled when he took office. Furthermore, the very next day, the EU clarified that agricultural protection would be off the table, stymieing a major goal of the negotiations. While discussions between the EU and US on trade have been intermittent since, talks have not begun and no European concessions have been made. In addition, the significant unpopularity of Trump in Europe has reduced the political capital available to European leaders to accept a deal with the US, further harming the likelihood of an agreement being enacted.

Finally, trade negotiations with China have been largely non-existent since the trade wars began. Instead, there has been a continuing tit-for-tat of increased US tariffs leading to larger Chinese retaliation over the past month, with Trump on August 2nd discussing the idea of increasing tariffs on $200 billion of Chinese goods to 25%. Furthermore, the Chinese yuan has depreciated almost 6% against the dollar in 2018 as a result of trade war fears and increasing interest rates in the US, making Chinese imports to the US even more competitive against US produced goods. For real negotiations to even begin, this escalation must stop, but both sides don’t seem willing to back down. Further, China is unlikely to take steps to either appreciate their currency or reduce domestic protection, because both steps would risk creating dangerous imbalances in the Chinese economy (for example, the depreciation of the yuan is largely a market-based reaction to tightening US interest rates rather than Chinese government intervention) and would demonstrate international political weakness unacceptable to the Chinese government.

More than two months after Trump implemented his tariffs as leverage to revise trade deals, each of his negotiations has barely begun, if at all. Indeed, for the EU, Canada, and Mexico, Trump’s negotiations have accomplished less ambitious liberalization than the TPP and TTIP that he dismantled upon coming into office. The promised long-term benefits, therefore, have failed to materialize for American farmers and manufacturers. Indeed, they face harmful long term headwinds that threaten their international competitiveness over the long term.

Damage to the economy will be long term

First, Trump’s trade policy has put the foreign consumer bases of American exporters at risk. Many US industries rely on exports to foreign markets as a key source of demand for their products. Over 36% of US agricultural revenue comes from exports, for example, and Canada, China, and Mexico are the top 3 export markets for American farmers, representing over $60 billion in US production. Maintaining access to these markets, therefore, is critical to the long term success of American workers. However, Trump’s tariffs have put this success at risk. When competing for foreign consumers, existing producers have large incumbent advantages, because the trading infrastructure is already in place and is costly to change even if other low-cost alternatives exist. The US was in a good position before the tariffs, therefore, because switching to other farmers (e.g. Canada or Brazil) had certain large start-up costs.

Trump’s trade actions have significantly changed this, however, because American supply has been cut off to their foreign consumer bases by the retaliatory tariffs, forcing foreign consumers to go to other producers and giving them incumbent advantages over American farmers. Furthermore, US trade policy has been fundamentally delegitimized, because the US President supported by Congress and the Republican Party have themselves to be willing to implement broad-based tariffs at will. As a result, foreign consumers aren’t willing to risk an export disruption from US tariffs in the future, and instead will go to other producers even if more expensive. As a result, many foreign consumers of US products have said that they will not return to US producers, even after the trade war has ended.

Second, the Trump’s trade policy threatens to significantly weaken the efficacy of the World Trade Organization, which has been a critical actor in encouraging global trade liberalization. Since Trump enacted tariffs on steel and aluminum imports, seven countries including the EU, Canada, Mexico, and India have filed challenges at the WTO to the tariffs. They claim that the US tariffs are being used as “industry safeguard restrictions”, which were ruled in 2002 (against the Bush steel tariffs) to be an illegal use of trade policy. The Trump administration has countered that the tariffs are justified under national security grounds, but this is a laughable justification that can be quickly disproved. Furthermore, the primary precedent for WTO-approved national security tariffs involved those by the EU, US, and Canada against Argentina during the Falklands War. While those involved restrictions against an authoritarian military junta at war with the UK, Trump’s tariffs are against liberal democracies closely allied with the US. As a result, it is likely that many of those challenges to Trump’s tariffs will succeed at the WTO, putting Trump on a collision course with that institution.

While Bush quickly backed down in the face of WTO sanction in 2002 and rescinded his steel tariffs, Trump is likely to not back down, and indeed creating an excuse to exit the WTO may have been a goal of these tariffs in the first place. This type of action would have grievous long-term consequences for the US economy. Firstly, the inability of the WTO to oppose US protectionism would significantly weaken its efficacy with other member states, who would use the precedent to themselves not reduce their trade barriers. The WTO has been extremely good for the US in that it has encouraged countries to reduce their import tariffs to US goods, among others, and indeed the reduction in China’s average import tariff from 32% in 1992 to 4% today was largely due to the conditions required for Chinese WTO entry. Furthermore, if the US refused to accept a WTO ruling, it would likely lead to the WTO-backed imposition of considerable retaliatory tariffs by all WTO members. Chinese retaliation has affected $34 billion in US exports so far and has already caused a significant decline in US farmer and manufacturer revenue. As a result, if each WTO member were to impose retaliation, US exports could fall by hundreds of billions of dollars, with severe impacts on the US economy.

Trump’s trade policy threatens the long-term competitiveness of US workers and the global trading system as a whole, in addition to significant short-term costs to the US economy. And what has been achieved in return – no meaningful trade agreements with Canada, Mexico, the EU, or China, let alone major liberalizing concessions. Indeed, if Trump had simply continued to negotiate the TPP and TTIP treaties that he dismantled when he took office, the US would have made more progress on trade liberalization, without any of the costs to US workers. Congress must act to reject this failed trade policy this fall, before the damage done to American farmers and manufacturers, as well as the global trading order, is made permanent.

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