Trumps Trade Policy

 

A postmortem on the Trump trade policy. Donald Trump was touted as an economic genius. After all he has a degree from the most respected school of higher learning of economics in the U.S. The Wharton School of the University of Pennsylvania, or Wharton for short. He has had a career in business, and high finance, with some gains, and some losses, both spectacular, and dismal. So when he was elected, we were lead to believe that with this experience and knowledge, and his quote exceptional negotiating skills, that our economy, and trade would boom to 4% or even 5% growth, during his administration. Well, let us look at the numbers, to see if any of that bears out.  

To begin with we were promised a 4% or5% GDP growth. The GDP was 2.9% when Trump took office, and Unemployment was 4.8%, the unemployment rate in Feb 2020 was 3.5%. Down 1.3%. While the drop is good, it is not spectacular, nor is it near historical. Growth rate for the last quarter before Covid, was 3.5%, and for 2019 was 2.3%. Hardly the 4% or 5% we were promised. So the economy was good, or ok, but not historical like we were led to believe by Trump.

Now on to trade; Trumps big push was to decrease the trade deficit with China. The solution was to start a trade war with China. The rise in our import tariffs, would bring our exports up to equal with our exports. China then did the same. The rise in our export cost would pay for that raise. Well guess what, the rise in the cost of goods from China, wasn’t borne by China. The rise in tariffs were passed on to the consumer. As is always done in business. The cost of living went up. Trump cut taxes, by 2.3% and the cost of living went up 3%. Not to mention the farmers lost their market share of 70%. Thus putting them on the government dole. The trade deficit with China grew, when it was supposed to fall. In 2020 the goods and services trade deficit with China went form $481 billion in 2016, to $679 billion in 2020. An almost 2-billion-dollar increase. The trade deficit in goods alone was 21% higher than on 2016.Trump’s “Phase One” trade deal, is a partial win, but not the historic deal we were led to believe it was. The Chinese in early 2021 bought a large amount of our corn, but not enough to offset the exports that were laid out in the agreement. U.S. goods and services exports to China Jan. through Dec 2020, were about $20 million less than Jan 2017.  In Trumps defense, the numbers might have been lower if not for the global Coronavirus pandemic.

For all his education, and experience in finance and economics, Trumps trade policies were a complete disaster. He didn’t understand that the economy was dictated ti by macroeconomic factors. That the U.S. economy does not exist in a bubble. That we are a piece of a global economy. As such, we have to compete in that economy. In other words, we don’t have to compete to produce the best widget in the world. What we have to do is compete to be part of the widget production. We export services, as well as manufactured goods.

And finally, Trump himself, and his daughter, were part of that 21% higher goods deficit. Considering Trump in particular, imports 75% of the goods on his website from China. In the first three years Trumps average GDP growth rate was 3.1%. It will be considerable lower, when 2020 is factored in. The first three quarters of 2020 the growth rate was .7%, or seven tenths of one percent. Tell me again how that is genius? America first for everyone but himself and his family. How is any of that effective, or even good leadership?