Globalization

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.

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.

Trump's European Tariffs Would Weaken The US Economy And The Transatlantic Alliance - 2/14/19 - Auto tariffs on the EU would destroy thousands of US manufacturing jobs, raise car prices across the country, and weaken our alliance with our European partners. Congress must act to challenge this looming trade war.

NDN Supports Bicameral Tariff Bill - 2/8/19 - NDN is pleased to endorse and support the Bicameral Congressional Trade Authority Act of 2019, legislation which provides critical Congressional oversight on the President’s ability to use national security as a justification to impose tariffs on our close trading partners.

Trump's Tariffs Are A Growing Threat To The American, And Global, Economies - 11/28/18 - US growth expectations have fallen, manufacturing and agricultural firms now face higher costs and weaker demand, and the trade deficit has surged. With a President unwilling or unable to grasp the risks of a broader trade conflict, it is up to Congress to challenge Trump far more directly on his reckless trade policies.

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. 

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.

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.

Trump’s Tariffs Will Do Lasting Economic Damage If Not Opposed

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

By: Chris Taylor

Much of Trump’s trade policy has been centered on his idea that trade wars are easy to win and will lead to quick re-negotiations of trade agreements. In his mind, therefore, the use of false justifications to sidestep Congressional oversight and a refusal to engage in real economic analysis would not be a problem, because the tariffs would be quickly and painlessly rescinded once the trade agreements were revised. Two months into the trade war, however, the opposite has come true. Our trading partners have not come to the table, but instead have imposed painful retaliatory tariffs on US industries already reeling from higher import prices. With no end in sight, Trump’s tariffs have done significant damage to the economic health of the country, and they threaten to permanently harm the competitiveness of American workers.

First, Trump’s tariffs have harmed industries that rely on imported products, predominately steel and aluminum, as inputs for their own products. Heavy manufacturing companies, such as equipment producers Caterpillar and John Deere, have reported a drop in earnings of almost 10% since the tariffs took effect, as steel is the industries’ largest raw material cost and Trump’s tariffs have increased its price by 25%. Small manufacturing businesses have felt the largest negative impact, because they don’t have the economies of scale to cushion a significant increase in costs. Lawn equipment producers in Indiana have been forced to cut 40% of their workers, nail manufacturers in Missouri have axed 15% of their workforce, and television-manufacturers in South Carolina have closed their plants. The construction industry, which employs over 7 million mostly blue collar workers, has in particular been harmed by Trump’s trade wars. Tariffs on steel and aluminum alone are estimated to cause the loss of 28,000 construction jobs as the raw materials and heavy equipment used in the construction process have become significantly more expensive. All told, the non-partisan Trade Partnership group estimates that Trump’s $22 billion in steel and aluminum tariffs alone will cause a loss of 179,000 jobs in manufacturing and services, far outpacing the estimated 33,000 job increase in steel and aluminum production.   

Second, Trump’s tariffs have led to the imposition of retaliatory tariffs on US exports by China, Canada, and the European Union. The agricultural industry, whose exports are heavily affected by Chinese demand, has been hit particularly hard, with the prices received by American farmers for soybeans falling over 16% to decade-long lows and prices for hogs and corn falling by 15%. In Iowa alone, farmers could lose $630 million as a result of losing export access to foreign markets if Trump’s tariffs stay in place. Trump himself has conceded that his tariffs are harming agriculture, which led him to provide a $12 billion bailout to struggling farmers. Even this significant amount (over $14 for every $100 of imports affected by the tariffs) isn’t enough to stop the damage from reciprocal tariffs, however. The US Chamber of Commerce estimates that bailouts to cover losses from retaliatory tariffs for all US industries would require an additional $27.2 billion in funding, of which $7.6 billion would affect automobile manufacturers and $9.6 billion other manufacturing industries. Rather than save US manufacturing, the trade wars are destroying jobs and creating bailout-dependent industries.

Finally, Trump’s tariffs are having a significant impact in an area often missed in the political discourse: business investment. For investors at home and abroad trying to invest their capital, the loss of export access for US industries and the extremely volatile policy environment in Washington has acted as a severe roadblock to investment in new factories and infrastructure. Net foreign direct investment (the level of investment coming into the country minus the level leaving the country) fell by 37% from the first quarter of 2017 to the first quarter of 2018. From January to May 2018, Chinese net investment in the US was actually negative $7.8 billion, meaning that more investment funds left the US than entered, in the midst of a 90% drop in Chinese investment into the US in 2018.

It is abundantly clear that Trump’s tariffs have been damaging for the US economy: fewer jobs, struggling companies that require government bailouts, and an exodus of investment spending. This lack of economic success mirrors the difficulty that the Trump administration has had in keeping its promises of an economic “revival” for the economy as a whole. In the 18 months since Trump became President, 300,000 fewer jobs were created than in President Obama’s last 18 months in office. Even worse, real average wages declined by 0.2% from July 2017 to July 2018, weakening Trump’s claim that his $1.9 trillion tax cut would help the middle class.

In particular, President Trump was elected to office on a message of creating economic opportunities for those left behind by this new age of globalization. By most metrics, however, he has failed to meaningfully improve the living standards of these “forgotten Americans”. In fact, from July 2017 to July 2018, 35.4% of counties that voted for Trump in 2016 actually lost jobs on net, compared to only 19.2% of counties that voted for Clinton. Trump’s tariffs have further harmed the economic opportunities of these people who most supported the president. In the Rust Belt, manufacturers from the auto to the household appliance industries have lost significant consumer bases and earnings, forcing them to lay off thousands of workers, while farmers across the Midwest are seeing their profit margins turn negative as prices for their crops plummet. The hardest hit groups haven’t been white-collar workers in coastal cities, but instead manufacturing, construction, and agricultural workers in states that voted for Trump.

Furthermore, the effects of the trade wars won’t go away anytime soon, even if the tariffs are rescinded. Domestic manufacturers and farmers have seen their export consumer bases eroded by cheaper foreign competition as a result of the tariffs (for example, Brazilian and Canadian soy bean exports to China that aren’t subject to reciprocal tariffs). These consumer bases take decades to build up, and their loss means that even when the tariffs are rescinded, US workers will have less access to foreign export markets for years to come, if at all. Indeed, Chinese officials have begun to say that American agricultural exports will be fully replaced by other countries’ exports, even after the tariffs are rescinded.

The first and second essays in this series argued that Trump’s tariffs were illegal and based upon utter ignorance by the President. Beyond that, the tariffs are enacting large costs onto average American workers, particularly those that were promised better economic opportunities by Trump during the 2016 election.  Congress must act to rescind these tariffs, before US manufacturers and farmers permanently lose out on the 86% of global demand that is outside of the United States.

A Department of Jobs, Skills and Economic Development

This essay was originally published on Medium.

Much of the structure of the government of the United States was designed and built in the middle part of the last century. The creation of the Department of Homeland Security in the aftermath of 9/11 was the last big structural change. In a time of rising global competition and technological change, it is time to fashion a new government department focused solely on creating good jobs for Americans, and helping American succeed in a new world of work that requires very different skills. Let’s call it the Department of Jobs, Skills and Economic Development.

It is remarkable to consider that the executive branch of our government has no one person or department truly responsible for creating good jobs for the American people, and ensuring our workers have the skills to succeed in a changing world. These responsibilities are scattered throughout the federal government, residing in the Departments of Commerce, Labor, Treasury, Housing and Urban Development, Education and Agriculture, the United States Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, the Small Business Administration and throughout the White House itself. A new Department of Jobs, Skills and Economic Development would consolidate these many disparate activities and programs in a single place, allowing for greater efficiency but also far greater strategic focus and coordination. The process of building the Department would force a debate about all the programs it would inherit, and whether they are working or can be improved. Redundant or under-performing programs could be eliminated, freeing up resources for higher priority projects. It would be a powerful department, but also should by design be a modern and skinny one — lean and mean.

 

Congress and the White House would ultimately decide what would end up in this new department and what would remain in other places, but certainly one could imagine some of these other departments and agencies getting subsumed entirely into this new mission. This new department (DJSED) would work closely with the economic development agencies and other agencies of the states, and learn from their best practices. Policymakers can also study how other nations tackle these challenges, and draw from their experience. The balkanization of these responsibilities in Congress would also end, and allow far greater strategic focus from our elected representatives.

One of the things this new Department can focus on is what I call a “safety net of skills and knowledge.” In the industrial age we created a safety net for our people, one that included health care and income support. It is also now time we committed to create a true system of lifetime learning, one that anticipates our citizens will need the acquisition of new skills to become routine and persistent throughout their lives. There are many ways this new 21st century safety net can get constructed and built, many pieces of it already exist, and it will evolve and mature over time. But it is something that our emerging Millennial politicians should put their minds to and help build over the coming decades. Like the Department itself, this new digital age safety net would be about taking things that are already getting done and organizing them in a way that makes them far more focused and effective.

The Department could also expand the small Economic Development Administration currently in the Commerce Department, and give it a more expansive mission that could even include national infrastructure and transportation planning and travel, tourism and trade promotion. It would work closely with the fifty states, supporting their ongoing locally driven initiatives. All fifty states have an economic development agency focused on creating growth and good jobs for their communities for a reason. It works. It is long past time the federal government and the nation had one too.

Perhaps the most important reason to create this new Department is that in my mind the only way we can respond to both the enormity of the task in front of us, and its urgency. We simply have to do more than we are doing today to help the American people succeed. And whatever we do needs to be dramatic, something real and tangible, not something that is nibbling around the edges of what is perhaps the most important challenge America faces today. We need to let the American people know we hear them, and are changing the way we do business here in Washington to make their lives better. There may be other ways of attacking this problem but creating a super-sized but lean and mean Department would be an important first step that will give us a chance of coming up with approaches commensurate to the size of the problem itself.

And the problem is real. With billions of people today contributing to the advancement of knowledge every day, our already fast world will continue to speed up. Skills and knowledge acquired in high and school and college will be far more likely to become obsolete in one’s lifetime in the 21st century, and we need ways to make continuous learning more than a slogan. Additionally, with nations across the world rising and growing modern companies, global competition for our businesses and workers is likely to get more far more intense. The time when America stood like a conquering giant above the economies of the world is long in the past, and a new age of competition and progress is with us. Our government must help its own institutions become as fast and innovative as the global economy itself, and to do far more to effectively support good, deserving Americans who work hard and play by the rules and expect more from all of us.

Perhaps this project is the Kennedy Moonshot of our time, something we know we have to do but are not quite sure how to get there. Creating a new Department with a new mission and lots of capacity and focus is a good way to start. Perhaps it is old Washington think — a reorganization! — but am open to better ideas on how we can get this done in the years ahead. Whatever you think let the debate begin. The good people of the United States deserve more from all of us in Washington as they look to compete and prosper in a far more challenging 21st century global economy.

Backgrounder: Budgets, Health Care and Trump's Great Betrayal

With attention returning to budgets and the US economy, NDN has assembled some of our work on these matters over the past few months.  We hope you find these analyses helpful.  

Trump's Tax Plan is Aimed at the 2018 and 2020 Elections, Not U.S. Competitiveness, Rob Shapiro, NDN.org, 4/26/17. Trump's claims that damage from higher deficits will be minor compared to the benefits for US competitiveness, economic efficiency, and tax fairness are nonsense, and the real agenda here is the 2018 and 2020 elections.

Release: Still no 2017 budget from GOP, or proposal from White House, Simon Rosenberg, NDN.org, 4/26/17. While the President’s revenue outline today is a late but welcome development, it cannot be given serious consideration outside the eventual full budget proposal that is usually submitted to Congress in February.

Trump puts foreign investors first by supporting the Republican tax plan, Rob Shapiro, The Hill, 3/28/17. Rob weighs in on the very real problems of the House GOP's proposed border adjustment tax.  

Trump's Great Betrayal, Simon Rosenberg, NDN.org, 3/23/17. President Trump is pursuing policies deeply at odds w/his pledge to help every day Americans. It should become known as "The Great Betrayal."

Column: 5 Ways Trump Could Stop Obama's Expansion, Simon Rosenberg, US News & World Report, 3/23/17. There just isn't a lot of justification for the market's optimism that Trump's economic policies - Maralagonomics - will keep the Obama expansion going.

Memo: In A New Global Age, Democrats Have Been Far Better for the US Economy, Deficits, and Incomes, Chris Murphy and Simon Rosenberg, NDN.org, 2/21/17. In a new memo NDN finds that over the past generation of American politics Democrats have been far better for the economy, deficits and incomes. 

Steve Bannon, Meet Russell Pearce, Simon Rosenberg, US News & World Report, 2/21/17. If history is a guide, Trump's efforts to institutionalize xenophobia and ramp up immigration enforcement could disrupt businesses, hurt the US economy and tear apart families. The blowback could be significant and cause lasting damage to his Presidency.

If you would like to read more of Rob's other recent work, be sure to review our backgrounder, "Rob Shapiro on the Economy."

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