In this news, we discuss the Analysis: Trump changed how the U.S. trades – not necessarily as intended.
WASHINGTON (Reuters) – US President Donald Trump’s ‘America First’ trade policy torched a 70-year consensus on trade liberalization, drew a harder line against China’s state-owned economic model, and erected new tariffs on imported steel and aluminum, alienating the allies.
Trump is touting his efforts to protect American workers and a Phase 1 trade deal with China that promises to boost U.S. exports as closing arguments for Tuesday’s presidential election.
Economic data to date shows mixed results from this effort, with some sectors gaining at the expense of others, but with little change in the overall U.S. trade deficit for goods and services.
Since 2018, Trump has imposed punitive tariffs on washing machines, solar panels, steel, aluminum, and goods imported from China and Europe, with Chinese imports accounting for most of the nearly $ 80 billion. collected so far. tmsnrt.rs/3kIptfx
Graphic: Trump’s Trade Remedy Tariff Collection Trump’s Trade Remedy Tariff Collection –
The tariff war against China began with an investigation in 2017 into long-standing US complaints about China’s economic policies, including intellectual property theft, forced technology transfers, and rampant subsidies to state-owned enterprises that made climb the US trade deficit.
Commercial interests largely supported the objectives of the “Section 301” investigation, but warned that tariffs would hurt US competitiveness by increasing input costs.
Retaliation and escalations ultimately imposed tariffs on $ 370 billion worth of Chinese goods before the Phase 1 deal was signed in January, committing Beijing to increase its purchases of US agricultural and manufactured goods, energy and in services of $ 200 billion over two years.
So far, tariffs have reduced merchandise imports from China, but have not significantly altered the United States’ global trade deficit in goods and services. tmsnrt.rs/2HLPKvh
Chart: Tariffs have little impact on the total United States trade deficit Tariffs have little impact on the total United States trade deficit –
Companies have responded by diversifying supply chains, shifting some production outside of China – but mainly to other low-wage countries, like Vietnam and Mexico, and not to the United States. tmsnrt.rs/2Jg8mnz
Chart: Substitution of the US trade deficit Substitution of the US trade deficit –
One of Trump’s goals was to increase American manufacturing jobs. The numbers have increased since taking office in 2017, in part due to a massive reduction in corporate taxes. But manufacturing employment growth slowed after tariffs were launched in 2018, becoming a trickle before the coronavirus pandemic struck in early 2020. tmsnrt.rs/2HLIeQV
The Federal Reserve’s measure of US manufacturing output also peaked in 2018. tmsnrt.rs/2HFFoNd
Chart: Factory jobs slowly gain after tariffs hit Factory jobs slow after tariffs –
Chart: U.S. manufacturing output peaks in 2018 U.S. manufacturing output peaks in 2018 –
Trump angered U.S. allies in Europe, Asia and the Americas by imposing tariffs of 25% on steel and 10% on aluminum in 2018 for national security reasons.
The tariffs have prompted further investment in the industry and the restart of some idle plants, including here US Steel Corp’s XN Granite City Works in Illinois. But the hiring renaissance was short-lived as falling prices prompted some closures, including one of two blast furnaces in Granite City, where Trump announced the industry’s revival in July 2018. tmsnrt .rs / 31OH120
Chart: Jobs at US steel plants rise, fall after tariffs Jobs at US steel plants rise, fall after tariffs
Steel industry executives have argued that without the tariff protections domestic steelmakers would be in a much worse position due to a glut of global production largely centered in China. Tariffs reduced the market share of imports, allowing domestic steelmakers to use more of their capacity. tmsnrt.rs/3kDYe5E
Chart: Utilization capacity of US steel mills increases, decreases, plunges US steel mills utilization capacity increases, falls, plunges –
Supporters of Trump’s trade strategy argue that it did not lead to the major upheavals predicted by the industry and that it won bigger concessions from China than any previous US president.
This has prompted U.S. companies to branch out from China and move some critical supply chains to the United States, said Stephen Vaughn, former general counsel in the office of the U.S. Trade Representative.
“All the kinds of disasters that the folks on the other side predicted literally never happened,” said Vaughn, now a business partner with the King and Spalding law firm. “Even if you assume that all tariffs were paid by consumers, an $ 80 billion tax increase was never going to wreak havoc on a $ 22 trillion economy.”
While Trump’s Phase 1 trade deal is now starting to boost agricultural exports to China after a slow start amid the COVID-19 pandemic, it has failed to address many issues that really matter to businesses American. These include China’s technology transfer policies, industrial subsidies, and barriers to accessing digital services in China.
“There is still a legitimate question as to what all this pain has paid for,” said Nasim Fussell, who served until August as the Republican trade adviser on the US Senate Finance Committee. “There will be pressure from stakeholders to work on a phase 2” to address more substantive issues, added Fussell, now a specialist lawyer at Holland and Knight.
But China remains just over half of its purchasing targets from the first year of the Phase 1 trade deal, especially for manufactured goods during the COVID-19 pandemic, according to trade data here calculated by Chad Bown, Principal Investigator at the Peterson Institute for International Economics.
Economic factors such as commodity prices, Chinese tariffs, weak demand for air travel and a swine flu epidemic in China are weighing heavily on export flows, Bown said.
“The saying ‘you have to buy more’ doesn’t necessarily seem to work.”
Reporting by David Lawder; edited by Heather Timmons and Richard Chang
Original © Thomson Reuters