NDN Blog

WTO Strikes A Legal Blow Against Trump's Tariffs

On Friday, the WTO issued a series of rulings that struck at the core legal justification for Trump's steel and aluminum tariffs. The administration had argued that countries can impose tariffs based upon their own interpretation of national security interests, and that whether there actually is a legitimate national security concern can't be arbitrated by international trade courts. In a case not directly involving the United States but clearly aimed at Trump's tariff policies, however, the WTO ruled that countries can't simply impose national security-based tariffs for any reason at all, but instead can only impose them when there are unexpected war-related dangers requiring urgent action that involve interactions between sovereign states. This ruling significantly weakens the arguments that Trump had used to justify the tariffs. They have been imposed upon economies including Canada, Mexico, and the European Union, which clearly don't present "unexpected war-related dangers" (and Mattis in 2017 even said the tariffs weren't needed by the US military for any defense-related activities). Furthermore, US steel and aluminum manufacturers have lost business to private foreign companies, and the vast majority of nations affected do not provide state support to their steel and aluminum industries, so Trump's tariffs also don't involve direct interactions between sovereign states.

As NDN has long argued, Trump's tariffs instead represent an extraordinary abuse of Presidential power, and their imposition violates both US and international law. This ruling only reiterates that the tariffs do not serve a legitimate national security interest, and Congress must now act to rescind this latest violation of Presidential authority. You can read more about NDN's work challenging Trump's tariffs here, and find recent Congressional action towards reining in the tariffs here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Invite: Th, May 16th - "Patriotism, Optimism"

Over the past year or so Simon has been making a big argument about the past and future of the center-left in America.  Called "Patriotism and Optimism," it makes the case that America is not in decline and is in fact doing as well as it has in any point in its history. It is meant to be an explicit rebuttal to the core argument Trump is making about America and its decline, an argument which is malevolently selling America and its people short every day. 

This primary way this argument has made itself into the world is through a 45 minute long Powerpoint deck, which has been seen in dozens of showings over the web and live in person to policy makers here in Washington and around the country. Our next showing of the deck will be Thursday, May 16th from 12:00pm to 1:15pm at our new offices at 800 Maine Avenue SW, Washington, DC. Lunch will be served. You can RSVP for the event and learn more here. For background before the showing, feel free to check out some related readings below.

Key Background Readings On "Patriotism and Optimism"

The Case for Optimism: Rejecting Trump's Poisonous Pessimism, Simon Rosenberg, Medium, 6/2/17. In an essay that originally was published on Medium, Simon argues that the great rationale of Trump's Presidency  –  that America is in decline – simply isn't true, and must be challenged more forcefully.  This is the piece that spurred the creation of the presentation. 

Chin Up, Democrats, Simon Rosenberg, US News and World Report, 1/20/17. In his column Simon argues that Democrats should have pride in their historic accomplishments and optimism about the future of their politics. This one is very relevant to the presentation itself. 

A Center-Left Agenda for the Trump Era - Simon Rosenberg, US News and World Report, 12/9/16.  In the early days after Trump's election Simon layed out a possible agenda for the Democrats centering on prosperity, security, shoring up the American led liberal order and ambitiious efforts to reform our political system. 

Additional Readings

Some Thoughts On the Caravan - By Simon Rosenberg, Medium, 10/24/18.  The Caravan, composed of 7,000 poor, unarmed, mostly Honduran Central Americans, poses no threat to the US, and illegal border crossings continue to be way down. Some thoughts on what Democrats should do to respond to Trump's farcical attacks and terrible policies.

Are We Better Off Under Trump? The Short Answer Is No - By Simon Rosenberg and Chris Taylor, NDN, 10/18/18.  Most measures of the US economy are worse today than when Trump took office. Worse still, the President’s policies have made it very challenging to manage the next recession or global economic downturn.

Challenging Trump's Tariffs - An Ongoing Series - By Chris Taylor, 10/17/18.  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 them in the coming months. 

Trump's Immigration Strategy Is Failing - By Simon Rosenberg, NBC News, 8/6/18.  Almost nothing the President has done on immigration and the border has worked; expect more extreme policies as the elections approach. 

Congress Must Debate The Weakening of Global Order - By Simon Rosenberg, NBC News, 5/10/18.  Few presidents have inherited a world or a nation in which more was going right. Trump seems determined to undo it all.

The Pernicious Politics of Oil - Simon Rosenberg, US News and World Report, 12/16/16.  Petro-powers are challenging the global order, and the next president seems uninterested in stopping them.

An Enduring Legacy: The Democratic Party and Free and Open Trade - Simon Rosenberg, Huffington Post, 1/24/14.  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. 

Trump Is More Like Maduro Than Any Democrat

This essay originally appeared on Medium.

In recent months, the Republican Party has toyed with a new electoral strategy heading into 2020: accuse Democrats of becoming radical leftists opposed to free markets and democratic institutions, and argue that they want to transform the country into something similar to the Maduro regime in Venezuela. In February, for example, Trump delivered a speech in Miami accusing his political opponents of wanting to impose Venezuelan-style socialism on the United States, while Press Secretary Sarah Sanders in March said that “Democrats are harassing the President to distract from their radical agenda of making America a socialist country.” The strange dynamic of this argument, however, is that the picture it paints of Democrats’ supposed economic unorthodoxy and disdain for the rule of law is far more reminiscent of Trump himself.  More so than any US President in the modern era, Trump has derided the American market-based economic system as robbing Americans and destroying US jobs, all the while trampling on the rule of law and seeking to intimidate his political opponents.

Let’s drill down a bit on the ways Trump is more like Maduro than any Democrat here in the US:

Anti-Market Economic Policies, Picking Winners and Losers - Trump has overseen what has become the most anti-market economic policy of any President in the postwar period. First, his unprecedented attacks on the global trading system have directly weakened the competitiveness of innovative American firms in an attempt to prop up his favored industries. The steel and aluminum tariffs have increased costs to automakers like Ford and GM by over $1 billion, and have led to aggregate job losses of over 400,000 net jobs. And have the tariffs led to the end of unfair trading practices against American steel and aluminum manufacturers? No, because the vast majority of those US imports come from Canada, the EU, and Mexico, all of whom haven’t engaged in dumping or subsidies to their domestic steel and aluminum producers. Trump’s tariff strategy is no different from if he enforced punitive taxes on American automakers and then gave government handouts to the steel and aluminum industries. Indeed, as a result of his tariffs, much of the agricultural industry is now reliant on government subsidies to stay afloat as their export markets have dried up.

Second, in his Miami speech Trump derided the Venezuelan government for its “power to decide who wins and who loses.” And yet Trump consistently interferes in the market and attempts to leverage government power to intimidate firms that he doesn’t like and help companies that he does like. Trump attacked GM’s decision to scale back US production as a result of elevated raw resource costs, and threatened to cut off GM’s access to completely unrelated electric car tax credits that are available to all US automakers. He threatened to unilaterally increase the shipping rates that the US Postal Service charges to Amazon, in an attempt to harm Amazon and Washington Post owner Jeff Bezos. Furthermore, Trump attempted to force electrical grids across the country to buy coal- and nuclear-generated electricity, even if the grids didn’t want to use those sources because they were more expensive. And just last month, he tried to pressure the Tennessee Valley Authority into buying more expensively priced coal-generated electricity from several firms that were owned by friends of the President. Time and again, Trump has refused to allow competitive markets to function, and instead has turned to the socialist strategy of using state power to advantage his allies and harm his enemies.

Third, Trump has overseen the most fiscally irresponsible budget in the modern era, at a time when the strong US economy requires the least fiscal stimulus. Orthodox economics says that debt-financed stimulus should be done during economic downturns and then deficits reduced during subsequent economic booms, so as to maximize the efficiency of borrowed money and reduce the debt burden on future generations. Trump has done the opposite of this. With unemployment under 5%, his tax cut and increased spending have sent deficits surging from 3.1% of GDP in 2016 to a projected 4.2% this year, negating much of the progress that Obama made in reducing it from 9.8% in 2009 to 3.1% in 2016. This level of budget deficit during good economic times is unprecedented in the United States. Indeed, since the end of the Second World War, the three largest budget deficits as a % of GDP while unemployment has been under 6% have been Trump’s deficits in 2017, 2018, and 2019 (projected). Similarly, disregarding fiscal sustainability has been a hallmark of the Maduro regime, which ran budget deficits of 20% of GDP and 15% of GDP in 2015 and 2014 that have played a major role in the country’s current hyperinflation.

Repudiation of Democratic Institutions – The area in which Trump might resemble Maduro the most is in his contempt for the rule of law and democratic checks and balances.  Maduro and his predecessor Hugo Chavez gained absolute power in Venezuela through state take-over of the free press, packing the independent judiciary with their own loyalists, transferring the power of the elected legislature to the executive, and imprisoning their political opponents. If those authoritarian actions sound familiar, it is because they are similar to the steps Trump has tried to take to consolidate his own power (albeit in a system with far greater checks to such abuses). Trump has attempted to delegitimize the free press as the “enemy of the people” in the eyes of Americans, applauded criminal assaults against journalists, threatened to disband specific courts that have made rulings he opposes, threatens almost weekly to lock up his political opponents, and used a blatantly made up national security emergency to bypass the elected Congress to build his border wall. In each of these ways, the actions of the Maduro regime to consolidate power are echoed by Trump in his attempted actions and rhetoric, while it is the Democratic Party that has taken the mantle of defending democratic institutions in the United States.

Furthermore, the President has attacked the independent governmental institutions that help manage the economy when they take actions that Trump doesn’t like. When the Federal Reserve was raising interest rates in a way that Trump thought would hurt his approval rating, he launched the most vocal attacks on the Fed of any President in decades. Meanwhile, Trump’s newest appointee to the Fed, Stephen Moore, is likely the most blatantly political figure appointed to the central bank in recent memory. In December 2018, Moore wrote an op-ed titled simply “Fire the Fed”, and he has consistently called for Fed Chair Jerome Powell to resign. Finally, Trump and his advisors have constantly attacked the Congressional Budget Office for supposedly making up economic data to hurt Trump, even though there is no evidence whatsoever of this activity. Major elements of Maduro’s economic policy in Venezuela have included a takeover of the central bank to dramatically increase monetary stimulus for political gain (leading to hyperinflation) and the packing of the independent statistical agencies with loyalists who doctored data to increase Maduro’s popularity. Here, Maduro seems much closer to Trump than to the Democratic Party.

As the 2020 election approaches, Republican attacks on the Democratic Party and its candidates as socialists and Venezuela-lite will undoubtedly escalate. But for all of their condemnation of anti-market and authoritarian impulses in Venezuela, their man in the White House is the greatest embodiment of such sentiments in modern American history. As is so common with Trump, this new line of attack is simply an attempt at misdirection from the real economic achievements of Democrats and Republicans over the past generation. Contrary to the arguments portraying Democrats as scary socialists, the Democratic economic approach has actually produced far better results than that of Republicans. Since 1989, four times as many jobs have been created annually while Democrats have been in the White House than when Republicans have been. Similarly, median income has on average fallen under Republican Presidents while it has risen under Democrats, and the budget deficit and uninsured rate have on average increased under Republicans while they have declined under Democrats. If Republicans want to find a party that has mismanaged the economy and adopted increasingly authoritarian ideas, they should look in the mirror.

Growing Recession Risks Could Make Trump Even Less Stable

In recent weeks, new challenges have emerged to the conventional wisdom that the US economy is largely doing fine. Growth is projected to significantly decelerate this year, with first quarter growth seen at only 0.4% by the Atlanta Fed and 0.9% by Goldman Sachs. Manufacturing output, a key leading indicator of economic activity, has fallen significantly over the past six months, and four major manufacturing indicators (ISM PMIMarkit PMIPhilly Fed, and Empire State Fed) now show US industrial activity at its lowest level since late 2016. Finally, the most widely trusted recession indicator in the financial markets - the yield curve - is now at its flattest level (indicating its highest recession probability) since 2008, and the NY Fed's recession model shows a 24% chance of recession in the next 12 months, an alarming reading considering that over the past 40 years there has always been a recession within 12 months when the model has reached 28%.

An economic downturn, accompanied by a loss in confidence in the economy among the public, could significantly harm Trump's chances in 2020. While the President continues to have the consistently lowest first term approval rating in the post-World War 2 period, it has been kept above disaster territory by relatively strong approval of his economic management. For example, March's Ipsos poll showed his net approval at -13, but his net economic approval at +6. If such a downturn were to happen, therefore, the bottom could easily fall out on his Presidency, and a serious primary challenge could be undertaken against the President. As a result, as the economy continues to weaken, we'll likely see a more unstable and increasingly erratic Trump, who will try ever harder to please his base with even more reckless policies in an attempt to hide the slowing economy.

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

With Growth Slowing, Trump Releases A Budget Devoid From Reality

This morning, the Trump administration released their budget request for 2020 and with it their economic projections for the next decade. Unfortunately, the document reads more like a Trump rally speech than a serious piece of economic literature, and contains projections at odds with virtually every independent analysis. The budget forecasts growth of 3.2% in 2019, even though the Fed, CBO, IMF, and every major bank (Goldman Sachs, JP Morgan, Morgan Stanley, and Bank of America for example) all project that 2019 growth will be 2.5% or less (the average 2019 projection for those seven organizations is just 2.2%). Even more implausible, Trump's budget forecasts that growth will stay at 3% and above through 2023. In reality, the IMF projects that US growth will be closer to 1.4% in 2023, while the CBO forecasts a growth rate of 1.7% in 2023. The administration's fiscal daydream doesn't stop here though. Much of the growth boost in 2018 came from sharply higher budget deficits that boosted aggregate demand (the deficit of 3.9% of GDP in 2018 was the largest deficit when unemployment was under 6% since 1950). Trump's budget, however, sees a budget deficit of 3.7% of GDP by 2023, compared to the CBO's current estimate of 4.6% in that year. What the administration is saying, then, is that they will have double the rate of growth in 2023 compared to CBO projections, while also having less fiscal stimulus than the CBO anticipates (stimulus that would presumably be necessary on an even larger level to achieve anywhere near 3% growth). 

Above all else, today's budget request is a desperate attempt to rewrite the economic narrative of the Trump presidency. Growth is slowing, not rising, and will likely hit its potential rate of 1.8% by 2020. This means that the President's promise that his tax cut would create sustainable long term growth above 3% was a lie. In addition, the budget deficit will continue to grow to unprecedented levels when outside of a recession (and indeed, the deficit for the first four months of FY 2019 is already 77% larger than the first four months of FY 2018). Trump's promise that his tax cut would pay for itself and that he'd balance the budget within his first term in office? Another lie. So far in Trump's presidency, growth has been strong because of a large fiscal stimulus that, while having little effect on long term growth and blowing up the deficit, increased short term growth. Now that the stimulus is wearing off, however, the reality of Trump's poor economic policies is becoming clear, something that could be politically disastrous for him in 2020. 

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Trump's Trade Deal W/China Looks Toothless, 2019 Growth Stagnates

In pursuing his trade war with China, Trump promised American workers and farmers that the tens of billions of dollars lost from reduced export access and higher costs would be made up by a comprehensive deal that dealt with the structural advantages China gave to its own industry. In recent weeks, however, it has become increasingly likely that a potential trade deal with China will not do that, and instead will only involve some increased purchases by the Chinese government. The New York TimesWall Street Journal, and CNBC all report that any language in the deal requiring changes to China's intellectual property or industrial subsidies will likely be too vague to have any real effect, and will have few mechanisms for enforcement. This represents a startling defeat for the President. If Trump only wanted an increase in US exports, he could have simply signed the TPP trade deal on his first day in office, which was projected to increase US exports by over $350 billion annually by 2030 (compared to at most an additional $200 billion in annual exports to China under this deal, although even that would be offset by fewer exports elsewhere due to the resulting appreciation of the US dollar). Instead, he has significantly weakened both the US and global economies for gains that could have been accomplished two years ago. 

Furthermore, while fourth quarter GDP came in above expectations at 2.6% (but still below the White House's "long term projection" of 3%, less than a year after the tax cut), early projections for 2019 growth show a significant reduction in growth. The Atlanta Fed sees only 0.5% growth in the first quarter of 2019, while the New York Fed and Goldman Sachs both project 0.9% growth. These growth downgrades come on the back of new data showing that in February manufacturing activity fell to its lowest level since November 2016. Trump's economic policies are largely responsible for this economic slowdown. His trade policies have led to a significant deceleration of global growth as well as a loss of key demand markets for US manufacturers and farmers, both of which have reduced US exports and production. In addition, his tax cut has now clearly failed to lift business investment as was promised by the administration. Non-defense capital spending today is at a lower level than it was in May 2018, and business investment has grown at an annualized average of 4.4% over the past two quarters, compared to a quarterly annualized average of 6.3% in 2017 before the tax cut was enacted. NDN has written a series challenging Trump's reckless trade policy for its harmful effects on the US and global economies, which you can find here. As well, you can read NDN's work detailing how the overall Trump economy has underperformed the strong Obama economy of 2015-16 here

Weekly Notes On The Economy is a weekly column that NDN writes on the most recent economic news, policy, and data.

Trump’s European Tariffs Would Weaken US Economy, Transatlantic Alliance

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

On Friday, Nancy Pelosi will head to the Munich Security Conference with dozens of Congressional Democrats to reaffirm America’s security and economic commitments to our European allies. Since the end of the Second World War, the transatlantic alliance has played a critical role in defending liberal democratic values and ensuring widespread economic prosperity throughout the West, particularly in the United States. Today, over 7,000 European troops serve alongside American soldiers in Afghanistan, and exports to the EU support over 2 million jobs in the United States each year. While the Democrats reiterate America’s support for this critical alliance this weekend, however, Donald Trump will be preparing to drive a stake into its very foundations. On February 17th, the Department of Commerce will release their report on the national security implications of auto imports from the EU, which will almost certainly rubber stamp Trump’s claims that the EU is taking advantage of the US on trade. Following the report’s release, Trump will have 90 days to impose tariffs on EU auto imports as leverage to negotiate a trade deal, something that Sen. Grassley said Trump “is inclined to do” in an interview last month. Such a move would be devastating to the transatlantic system both economically and geopolitically, and Congress must decisively challenge such a decision.  

The imposition of auto tariffs of 25% on $65 billion worth of imports from the EU would be devastating to the US economy. First, the move would certainly lead to a trade war with the Europeans, and EU Trade Commissioner Cecilia Malmstrom already said last week that any tariffs on European auto exports would be met with reciprocal tariffs on tens of billions of dollars worth of American auto, agricultural, and industrial exports. As a result, auto production would fall significantly in the United States as exports fell, causing an estimated loss of over 700,000 jobs in the industry and a reduction in US GDP of $62 billion. This is on top of billions of dollars of lost earnings reported by Ford and GM as a result of Trump’s already imposed steel and aluminum tariffs, and would likely lead to negative earnings for the major American automakers in 2019. Second, the US tariffs act as a de facto tax on all American consumers. European-made cars would immediately skyrocket in price, but European-made auto parts are an integral part of American automakers’ supply chains, meaning that the price of US-made cars would also increase. The Center for Automotive Research estimates that the average price of a car would increase by $3,500 as a result of the tariffs. Not only would price increases reduce the disposable income of Americans, they would also reduce the number of overall cars sold per year in the US, causing significant job losses in the auto transport and dealership industries. Indeed, LMC Automotive estimates that the tariffs could cause US auto sales to fall by 2 million vehicles per year. The car sales industry employs over 1 million Americans, and a major slowdown in sales would lead to large employment losses there. What effect would a trade war over auto tariffs have on the US then? Tens of thousands of lost manufacturing jobs, and a big reduction in the disposable income of American workers.

Even worse, the auto tariffs could be the decisive blow that sends an already weak Eurozone economy into recession, something that could spark a global recession given already weakened global growth as a result of the US-China trade war. Over the past six months, growth in the euro area has weakened significantly as a result of global trade tensions, Brexit uncertainty, and fiscal issues in Italy. Last week, the European Commission slashed its growth projection for the Eurozone in 2019 from 1.9% to 1.3%, and Germany, the bloc’s largest economy, only narrowly avoided a technical recession in Q4 2018 while Italy, the bloc’s third largest economy, entered a recession last quarter. The imposition of auto tariffs by Europe’s most important trading partner would likely tip the weakened euro area into recession. Germany is by far the largest driver of growth in the bloc, and auto exports alone account for 5% of German GDP. Considering that German GDP growth was actually negative in the second half of 2018, a major shock to its most important industry would reverberate throughout its entire economy. Indeed, Barclays estimates that a 25% tariff on auto imports could lead to a 0.4 percentage point reduction in euro area growth in 2019. The result of a Eurozone recession would be very negative for the global economy, already in the midst of a slowdown from US-China trade tensions. The euro area is the 3rd largest source of global demand after the US and China, so a major slowdown there would lead to further weakness in global exports, and potentially a global recession.

Outside of the significant economic consequences of a trade war with the EU, such a move by Trump could tear the biggest hole in the transatlantic alliance since the end of the Second World War. America’s standing in the eyes of Europeans has already fallen enormously during the Trump administration, with “confidence in the US President to do the right thing regarding global affairs” falling by 75 percentage points in Germany, 70 in France, and 57 in the UK. Furthermore, Trump has consistently attacked the European Union as an entity (both in his support for Brexit and his support for far-right German parties opposed to Merkel) and has supported authoritarian, anti-Semitic regimes in Poland and Hungary even while the EU has attempted to sanction them. A unilateral American attack on the economy of the EU, however, would be a step beyond all of these actions, striking at the core quality of life of European citizens. The move would demonstrate that the United States under Trump fundamentally doesn’t care about Europe and the transatlantic alliance, and that Congress is either unable or unwilling to stop Trump from causing material harm to the EU. Further, the trade war is all the more harmful to EU-US relations because it is so clearly based upon fantasies created by Trump and his trade advisor Peter Navarro. Rather than taking advantage of the US on trade issues, the EU actually has a lower average tariff rate than the US according to the World Bank (2.35% in the EU vs. 3.36% in the US), and there have been no allegations of EU dumping or industrial subsidies regarding its auto exports as have been the case with China with furniture or solar panels for example. Trump is willing to significantly harm the EU’s economy to fix a make-believe trade problem that even his hawkish trade representative Robert Lighthizer says is a distraction from the real problem of China. With this in mind, the EU is likely to rethink their relationship with the US, and adopt a more “go-it-alone” strategy as has already started to become the case.

A new imposition of auto tariffs on the EU would likely devastate the US auto industry, cause a recession in the euro area and inflame the global growth slowdown, and significantly widen the growing schism in the transatlantic alliance. And what is Trump likely to get in return for such a move? Likely very little. Trump has justified the tariffs as needed leverage in future trade talks with the EU. However, the EU has clearly stated that they are not interested in a broad trade deal, and especially not one that includes agriculture. Furthermore, they have a strong incentive to not give in if Trump imposes auto tariffs, even if there is significant economic hardship: such a move would only encourage Trump to hold the EU’s economy hostage in the future for other negotiations, and being seen as subservient to Trump, the most unpopular US President in generations in Europe, would be politically disastrous for European leaders. Furthermore, as we saw in the Canada-EU trade negotiations that were almost derailed by half of the Belgian government over agricultural regulations and the failed TTIP negotiations, negotiating a trade deal with the EU involves harsh sacrifices by both sides that can fall apart at even the slightest hint of trouble, let alone a significant attack on the EU’s economy. And so the EU negotiations are likely to go about as well as the China negotiations – little progress made while the global and American economies suffer. But this time, the global economy starts from a much weaker position than it did in June 2018, and the Europeans are our critical allies, not our strategic rivals like China. In the face of these risks to global economic prosperity and the essential alliances that have created 70 years of peace and prosperity in the West, Congress must act to challenge this looming trade war and reaffirm our essential relationship with Europe. Doing so at Munich this weekend would be a great way to start.

The Trump Economy Is Not Working For Average Americans

At his State of the Union address this evening, Trump is likely to make grandiose claims about the state of the American economy. In just the past few months, he has claimed that the economy today is better than it has ever been, and that he has accomplished more in his first two years than any President ever. However, these claims are transparently false, and indeed, the economic performance of the US economy over Trump’s first two years has not even been better than that of Obama’s last two years, much less all of American history.

First, jobs growth. Although January’s payrolls report showing 304,000 new jobs was undoubtedly strong, we can’t let this cloud the fact that jobs growth has slowed under Trump (and indeed, monthly job growth was 300k or higher 4 separate times in 2015-16, compared to only twice in 2017-19). During the last 25 months of Obama’s second term, monthly jobs growth averaged 213,000. In the first 25 months of Trump’s term, meanwhile, it has slowed to 205,000 jobs per month.

Second, real wage growth. During the first 24 months of Trump’s term, real hourly wages have increased at a monthly average (annualized) of 0.9%. By contrast, real wages increased at a monthly average (annualized) of 1.35% during the last 24 months of Obama’s term.

Furthermore, median household income (which includes both private income and government taxes/transfers) grew by 1.76% in Trump’s first year, compared to growth of 5.15% and 3.13% in 2015 and 2016 under Obama.

Third, the deficit. When the economy is near full employment, traditional Keynesian economics would prescribe a reduction in the deficit, to provide the fiscal room for stimulus in the future. As a result, the deficit as a % of GDP fell under Obama from 9.8% of GDP in 2009 to 3.1% in 2016. Trump has reversed this trend, increasing the deficit from 3.1% of GDP in 2016 to 3.9% in 2018, and a projected 4.2% in 2019. Deficits this large while the economy is strong are unprecedented in US history. Trump’s budget deficits of 3.4%, 3.9%, and 4.2% in 2017, 2018, and 2019 will be the largest deficits while the unemployment rate is under 6% since 1950.

Fourth, the trade deficit. Perhaps Trump’s most signature promise was to end the so-called “foreign theft of American wealth” that he thought the trade deficit represented. Regardless of the lunacy of such thoughts, how successful has the President been in reducing the trade deficit? In fact, Trump’s policies have led to a surge in the trade deficit, as growth in imports has increased significantly while US exports have struggled. In June-October 2018, the average monthly trade deficit was 28% larger than during Obama’s second term.

Finally, access to health insurance. Trump promised expanded access to healthcare coverage during the 2016 campaign and argued that Obamacare was stopping people from accessing quality insurance. In office, however, Trump has down the opposite, eliminating the individual mandate, reducing federal government subsidies to individuals on the exchanges, and encouraging work requirements for Medicaid that have kicked tens of thousands off of the program. As a result, 2017 was the first year that the uninsured rate didn’t fall since 2009, and the uninsured rate actually rose by 0.3% for households earning less than $100k/year. By contrast, the uninsured rate fell by an annual average of 1.6% in Obama’s second term, and by 1.7% annually for households making under $100k/year.

After two years of the Trump administration, then, how has the US economy performed? Jobs and wage growth have fallen, even in the face of a surging fiscal deficit. The trade deficit has increased significantly thanks to Trump’s own trade policies. And the most vulnerable Americans have seen their access to healthcare worsen for the first time in a decade.  

In New Global Age, Dems Have Produced Prosperity, the GOP Decline

This essay originally appeared on Medium.

Earlier this week, Bloomberg News published a new analysis of America’s economic performance under the past seven Presidents. The report ranks the economic progress made during each Presidential term since 1977 based upon 14 gauges of economic and financial activity, from wage growth to job gains to economic growth. On aggregate, Clinton and Obama take the top two spots, followed by Reagan and H.W. Bush in third and fourth, with Carter, Trump, and W. Bush coming in fifth, sixth, and seventh. Perhaps most importantly, this ranking shows the deep discrepancy in economic performance between the two parties. The last two Republican Presidents have overseen the two worst economies since 1977, while the last two Democratic Presidents have managed the two best economies. In this new age of globalization since the end of the Cold War in 1989, the two Democrats (Clinton and Obama) rank one and two, while the three Republicans (H.W. Bush, Trump, and W. Bush) rank three, four, and five. For all his bluster about “the best economy ever,” Trump ranks second-to-last behind even Jimmy Carter, and ranks above average among the seven Presidents on only 2 of the 14 metrics.

Source: Bloomberg

This study is consistent with the big argument that NDN has been making through our Patriotism and Optimism Project that the two parties’ recent performances while in the White House are not symmetrical, particularly on economic issues. While Trump’s central argument about the economy has been that this new age of globalization has failed to deliver economic prosperity to most Americans, regardless of which party has been in power, it is actually the case that Democrats have made the new global economy work for everyday Americans, while Republicans have failed to do so. Since 1989, the two Democratic Presidents (Clinton and Obama) have overseen strong and inclusive economic growth, while the three Republican Presidents (H.W. Bush, W. Bush, and Trump) have seen economic under-performance and even recession and decline. Rather than broad economic trends, it is the wide difference in economic management between the two parties that has shaped America’s economic fortunes.

Aggregate data that NDN has compiled for our Patriotism and Optimism Project confirm the startling asymmetry between the two parties on the economy. On job growth, Clinton and Obama have overseen almost 4 times the yearly gains as H.W. Bush, W. Bush, and Trump (averaging an increase of 2.12 million jobs per year compared to only 0.63 million jobs per year for the three Republicans). In total, the two Democrats oversaw an increase of 34 million jobs during their tenure, while the three Republicans saw only 9 million new jobs.

Source: BLS

On median income growth, meanwhile, Clinton and Obama averaged growth of 1.2% per year, whereas the three Republicans averaged a decline of 0.4% per year. All the more alarming is that even though the Republican Presidents achieved poor job and income growth during their tenures, they did so while also increasing the budget deficit significantly more than the Democratic Presidents. H.W. Bush, W. Bush, and Trump increased the deficit by an average of 0.5% of GDP per year, whereas Clinton and Obama reduced the deficit by an average of 0.4% of GDP per year. As can be seen, the difference in economic performance between Democrats and Republicans has been stark and significant.

Source: Federal Reserve Bank of St. Louis

Looking over the data, it is clear that the Democrats have been the party of economic progress and fiscal sustainability, whereas the Republicans have boosted deficits while achieving poor job and income growth. It is unsurprising, then, that the two generations that have grown up since 1989 (Millennials and Gen Z) are strikingly Democratic-leaning. In the 2018 midterms, voters under age 29 supported Democrats by a 35-point margin, and voters under 45 by a 25-point margin. For these voters, who will soon make up the majority of the electorate, America has succeeded both economically and socially under two successful Democratic Presidents, whereas Republicans have had three consecutive failed Presidents.

Trump’s Tariffs Are A Growing Threat To The American And Global Economies

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

Today there is a growing body of evidence that one of Trump’s signature policy proposals, the tax cut, hasn’t delivered the economic returns promised by the President. I will argue in this piece that his other major initiative, the protectionist trade policy, has also failed to deliver on his promises. In launching the tariffs, Trump’s promises to Americans were simple: strengthen growth, reduce the trade deficit, and help US manufacturing. By any account, each one of these has failed. Instead, the trade war is now viewed as a growing risk to the global economy, and threatens to weaken the strong economy that Trump inherited in 2017.

Risks to Economic Growth

Since mid-summer, future growth expectations for the US and global economies have rapidly declined.  In Bank of America’s November investor report, 44% of investors expected a decline in global growth in 2019, the highest number surveyed since November 2008 on the eve of the Great Recession. In October, meanwhile, the IMF reduced their forecast of global growth for both 2018 and 2019 from 3.9% to 3.7%, representing a global income loss of almost $530 billion. This weakening of the global economy is likely to put significant downward pressure on US growth as well. Goldman Sachs now forecasts that US growth will fall from 3% this year to 2% in 2019, and will hit only 1.6% in the fourth quarter of 2019. Similarly, JP Morgan estimates that growth will decline from 3.1% this year to 1.9% in 2019, and will hit just 1.5% in Q4 2019.

Trump’s trade policies, which have placed tariffs on $250 billion of Chinese imports and $50 billion of steel and aluminum imports primarily from Canada and the EU, have played an important role in this slowdown. First, higher tariffs mean that domestic companies have to pay more for intermediate inputs, putting downward pressure on jobs, income, and capital investment as firms have to account for higher costs. Second, with less access to cheap foreign goods, the purchasing power of domestic consumers falls, meaning that workers can buy fewer products for every dollar they earn. Finally, tariffs create inflationary pressures by taxing low cost goods, which forces the Fed and other central banks to hike interest rates faster, thereby tightening financial conditions in the global economy. It is no surprise, then, that in Bank of America’s November investor report that found 44% of investors expecting a decline in global growth in 2019, investors cited Trump’s trade war as the biggest risk to the global economy (35% of investors), ahead of the Fed’s rate hikes (26% of investors), and rising corporate debt (14%). Business investment, a key component of growth and something heavily affected by firms’ input prices and consumer demand, has likewise slowed significantly in the face of Trump’s trade policies. Non-residential private investment rose only 2.5% in Q3 2018, compared to an average of 10.1% in the first half of 2018 and 6.3% in 2017. Furthermore, new durable goods orders have fallen for two straight months and are down 1.2% since June, significantly lower than the 2.3% growth seen in January to June 2018.

Worsening of the Trade Deficit

The six months since June have also seen a large widening of the trade deficit, and the US today is running its largest trade deficits since 2008. Since the tariffs were enacted, the trade deficit has increased by 18.1%, compared to economic growth in that period of 1.8%. Since June, the trade deficit has averaged $50.8 billion per month, which is 5% higher than its Jan-May 2018 average, 10.4% higher than its 2017 average, and 21.4% higher than its 2016 average under Obama. Given that one of the biggest impetuses behind Trump’s tariffs was to reduce the trade deficit, the policy as a whole seems to have faltered.

Driving the increase in the trade deficit, firstly, has been a decline in US exports. Exports have fallen at a 0.6% annualized rate since June, compared to an increase of 8% (annualized) in Jan-June 2018, 7.8% in 2017, and 4.1% in 2016. Secondly, US imports have skyrocketed since the tariffs were enacted, even though one of their major purposes was to encourage the substitution of imports with domestic production. Imports have risen at a 12% annualized rate since June, compared to 0.2% (annualized) in Jan-June 2018, 9.7% in 2017, and 4.5% in 2016. These trends are unsurprising given the effects of Trump’s tariffs. Almost $150 billion of US exports have had retaliatory tariffs enacted against them by our trading partners, and crucial intermediate inputs like steel and aluminum have seen their prices rise by over 20%, making American products uncompetitive abroad and at home.

Harms to US Manufacturing

Outside of the major macro-economic goals of improving growth and reducing the trade deficit, the tariffs were also primarily crafted to help US manufacturing. Instead, however, American manufacturing companies have been strongly hurt by the tariffs, and the auto industry in particular has seen its global competitiveness weakened. Since June, the S&P 500 Industrials index (which covers industrial companies within the S&P 500) has fallen by 5.1%. By contrast, it rose at an annualized rate of 11.8% from January 2017 to June 2018 and by an annual average of 14.2% during Obama’s 2nd term.  

GM, meanwhile, has seen a 15.2% decline in its stock price since June and earlier this week announced the layoff of 14,000 workers in North America and the closure of five plants. This is on the back of the company losing $1 billion in earnings in 2018 alone as a result of Trump’s steel and aluminum tariffs, and a 15% decline in GM’s sales in China in October as a result of worsening trade tensions. Similarly, Ford’s stock price has fallen 20.1% since June and the company last month announced likely layoffs of 12% of its global workforce (24,000 workers). Ford too reported that Trump’s tariffs would cost the company over $1 billion in earnings this year. Tesla also reported a drop in its China sales of over 70% in October, after warning last month that the trade war would harm its business. Finally, new reports suggest that the 25% tariff on foreign-made autos that Trump is considering would destroy a further 715,000 jobs in the auto industry and reduce annual GDP by $59 billion. Rather than revitalize US manufacturing, Trump’s tariffs instead have reduced its global competitiveness. With rising input costs and constrained export access, US companies particularly in the auto industry have been forced to lay off workers and close plants.

Large Losses in American Agriculture

The second biggest supposed benefactor from Trump’s tariffs were American farmers, who Trump claimed were taken advantage of by Canada and European protectionism. More so than any other industry, Trump’s trade policy has significantly harmed American agriculture. From June to September 2018 (the most recent data), US agricultural exports fell 1.8% YoY and the US trade surplus in agricultural products fell by 26%. As a result, the recent increase in farm bankruptcies throughout the country that began in 2017 has continued unabated, reaching levels over twice as high as those in 2013 and 2014. Soybean farmers in particular have been devastated by Trump’s trade war with China, and have seen a 97% decline in exports over the past three months.

Furthermore, while $12 billion in government bailouts has kept some farmers afloat, the damage done to agriculture (and to the rest of the US economy) will continue long after the tariffs are rescinded. New supply chains that exclude American workers, instead going to Canadian and Brazilian exporters, have been developed in place of American ones that took decades to develop. Further, the level of uncertainty over basic trade policy created by the Trump administration makes it less likely that American or foreign firms will invest in long term projects in the US.

Today there is an overwhelming body of evidence that Trump’s tariffs are unpopular and causing material harm to the US and global economy. The question now is, what do we do about it? In a recent Wall Street Journal interview, Trump showed that he doesn’t understand what he’s doing and that no rigorous analysis backs up his views on trade. As a result, it is unlikely that he can offer ideas to address the growing risks of the trade war with China and the conflict with our closest allies over auto tariffs. It will be up to members of both parties in the next Congress to challenge Trump far more directly on his reckless trade policies, and remove the threat to the US and global economies. 

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