Home > Uncategorized > Why Trump’s tariffs are nearly as unpopular with his voters as Obama’s trade policy was

Why Trump’s tariffs are nearly as unpopular with his voters as Obama’s trade policy was

from Dean Baker

Donald Trump made his opposition to much of America’s international trade policy a central theme in his presidential campaign, and his position almost certainly played a major role in his victory in key industrial states like Michigan, Ohio, and Pennsylvania. But the public now seems largely opposed to his recent tariffs against our major trading partners.

It is possible to make sense of these seemingly contradictory facts.

First, most people are not policy wonks. They have day jobs and, when they get back from work, they often have family responsibilities, so getting the news means hearing a few tidbits on the television or radio, or possibly skimming an article in a newspaper or online.

This means that the vast majority of people only have the most general understanding of trade and trade policy. In the election of 2016, there was a widely held view that trade policy had hurt many people, which was why both Donald Trump and Hillary Clinton opposed the Trans-Pacific Partnership, the most important trade deal then on the table. (Trump pulled out of the dealshortly after his inauguration.)

People were not wrong to hold a negative view of trade policy: Over the prior four decades, it had put U.S. manufacturing workers in direct competition with their low-paid counterparts in the developing world by reducing tariffs and other barriers that had caused foreign-made products to cost more. The predicted and actual effect of this policy was the loss of millions of manufacturing jobs. 

Losing these jobs put downward pressure on the pay of less-educated workers more generally, as the workers who lost their jobs in manufacturing then sought out employment in retail, health care and other service sector industries. This was an important factor in the rise in inequality and the weakening of unions over the last four decades.

A tariff is a tax, and tax increases are usually not popular.

While people could see and feel the pain that resulted from U.S. trade policy overall, they are now not clear on what is to be gained from the tariffs Trump is imposing on imports from Canada, the European Union, China and other trading partners. A tariff is a tax, and tax increases are usually not popular.

The immediate impact of tariffs is to raise the price of the goods on which they are imposed, and that has already happened for a variety of products. On items like washing machines, it has already led to a 13.1 percent increase over the last year in prices paid by consumers.

In intermediate goods, like steel, it has led to price increases for downstream industries, like the auto and appliance industry. The higher price is good news for steel producers, who are adding some jobs, but it is likely to cause jobs losses in other industries.

In addition to the U.S. taxing its own consumers for purchasing foreign-made goods, other countries are retaliating by imposing their own tariffs on U.S.-made products. This is already hurting the prices of a number of agricultural crops and, as tariffs spread, many other industries might be hit as well.

While tariffs have real costs, they can be an effective tool in trade negotiations — if they are part of a well-worked out strategy to achieve specific goals. Unfortunately, Trump’s tariffs do not appear to be part of a carefully considered plan.

Instead, Trump has publicly lashed out at our trading partners over largely-imagined wrongs. For example, he complained to Canadian Prime Minister Justin Trudeau over his country’s large tariffs on U.S .milk, but, imports to both the U.S. and Canada are regulated by quotas, which allow dairy products to enter tariff-free. Canada has hugely expanded its quota in recent years and now allows more dairy products from the U.S. to enter tariff-free than we accept from Canada.

He also has complained about the high tariffs the EU imposes on imports from the U.S. when, in fact, the average tariff is just 3.0 percent.

There are real issues that Trump could raise with our trading partners — most importantly the issue of China’s under-valued currency, which makes its goods and services more competitive internationally. But after pressing the issue of “currency manipulation” for over a year in his campaign, it has disappeared from his trade agenda and Treasury Secretary Steven Mnuchin has said only that the administration is “monitoring” China’s actions and would issue its regular semiannual report on the issue in October.

So, though Americans don’t suddenly have a positive view of “free trade,” they are seeing a president imposing punitive tariffs on a wide variety of products, with the threat to add more, in the pursuit of ill-defined and constantly shifting goals. This does not seem like a trade war the United States is likely to win and it is not surprising that most Americans are not anxious to join his battle.

  1. patrick newman
    July 29, 2018 at 4:26 pm

    It is not about obtaining a comparative advantage through countries specialising in the areas of relative strength. It is about the freedom of international corporations to maximise profits without regard to national boundaries and systems of government. Nothing is more contemptible than UK’s Brexiteers claiming that out of the EU all trade deals will be sweetheart deals!

  2. Helen Sakho
    July 29, 2018 at 6:26 pm

    As is commonly accepted ” you can’t have the pie and eat it”! Pie (pi) stands for profit.The only comparative disadvantage belongs to the starving poor who have no pie or no sweets to eat. They would gladly accept the most sugary of anything to survive, and not care about morbid obesity, or other morbid diseases! Isn’t this simple formula “a piece of cake for some”?

  3. July 29, 2018 at 7:16 pm

    “…and tax increases are usually not popular.”

    I associate paying taxes with making life better in terms of better education, better roads, better health services, etc. As long as the government who gets the money uses it for those purposes, I have no reason to dislike taxes that are not unreasonable. If I didn’t pay those taxes, then I would not have those benefits.

  4. Craig
    July 30, 2018 at 12:04 am

    Tariffs are attempts to protect national economies that have been used repeatedly by us and others for well over 100 years. They are terminally orthodox old paradigm thinking that hamstring the economic virtues of thrift and competition. With the new paradigm policies of a universal dividend and a high percentage discount/rebate at the point of sale and final retail sale integrating price deflation into profit making systems the national economy would no longer need such old paradigm measures and could prosper like never before on only domestic demand. Conservative and libertarian economists need to drop the fallacy of general equilibrium and liberals need to stop using euphemisms like disequilibrium to describe the economy when the bald truth is the economy is actually most accurately described as financially raped smothered chaos with the additional collusion of corporations with global reach. The longer we ride our favorite hobby horse theories and euphemisms without accomplishing the rejuvenating integration of the truths in opposing perspectives that is a new paradigm the more likely we will unconsciously be doing the disintegrative bidding of dunces and dupes like Trump who believe in “Fourth Turnings” which is actually the all too familiar historical inability to consciously create the integrative thirdness greater oneness of paradigm change.

  5. Helen Sakho
    July 30, 2018 at 1:31 am

    Better “Third Way” books were written by famous non-economists who tore up important UN resolutions in New York not so long age and decided to stay in a tent while on a tour to Europe to prove their independence and authenticity as leaders. Alas, they, too, were overthrown by the more power Western leaders and their oil companies that accompanied them together to issue a simple friendly warning in North Africa. Perhaps, we can all learn something from the Buddhist monk, who set himself on fire in front of the same building without a single twitch in protest of human rights violation in his part of the world. Or, the poor street vendor, who became associated with the “Arab Spring” to indicate that some sort of liberating fresh air had arrived to start a revolution for human rights! The issue was abject poverty. The poor boy was trying to sell bread in the bazaar. When you are so poor you really will not be very impressed with harrowing TV shows. Your reality will be thinking if you can support your mother from the sale of home-baked bread the next day, and if it is better to kill yourself or to go back empty-handed.

  6. Prof Dr James Beckman, Germany
    July 30, 2018 at 1:04 pm

    Dean, decades ago when I was involved in foreign aid & the aligned Peace Corps, we began to say “Trade, not Aid” as the aid was largely wasted through corruption & non-competence in foreign settings. So we tried trade–and billions of people thank us. So two sides, at least, to every story.

  7. Craig
    July 30, 2018 at 9:24 pm

    Let us have trade as mutual aid, not as ultimately failed attempt to stabilize domestic economies with an inherent scarcity of total individual incomes in ratio to total costs and so total prices.

  8. Jan Milch
    August 2, 2018 at 12:28 pm

    Trade is a complicated question indeed.Ha-Joon Chang have written a lot interesting about this.

  9. August 11, 2018 at 10:47 am

    Americans may not be policy wonks, but many do recognize when they’re being taken advantage of. Free trade never exists in practice. Trade is always prejudiced by those who design and deploy it. Whose prejudices control trade now and over the last 50 years. As Baker points out here and elsewhere the answer are the prejudices of big corporations and rich investors, including members of several autocratic governments. In simple terms, the tendency in trade over the last 50 years is fascist. That’s a dangerous trend, if left unchecked will destroy western democracy, including the US. Trade fascism has been the policy of the United States over every Presidency since Jimmy Carter. Ronald Reagan was a committed fascist. But even so-called moderate Presidents (e.g., Bill Clinton, Barack Obama) carried on the fascist trade policies Reagan began. Now Trump arrives with sociopathic fascism to create even crueler and more unfair trade policies.

    This fascism has been coming for a long time in America. In 1985 Bertram Gross wrote of the new fascism developing in America. He called it “Friendly Fascism.” “Looking at the present, I see a more probable future: a new despotism creeping slowly across America. Faceless oligarchs sit at command posts of a corporate-government complex that has been slowly evolving over many decades. In efforts to enlarge their own powers and privileges, they are willing to have others suffer the intended or unintended consequences of their institutional or personal greed. For Americans, these consequences include chronic inflation, recurring recession, open and hidden unemployment, the poisoning of air, water, soil and bodies, and, more important, the subversion of our constitution. More broadly, consequences include widespread intervention in international politics through economic manipulation, covert action, or military invasion. On a world scale, all of this is already producing a heating up of the cold war and enlarged stockpiles of nuclear and non-nuclear death machines.” Amazingly prescient from 1985.

    • Prof Dr James Beckman, Germany
      August 14, 2018 at 12:02 pm

      Ken, my view on “global fascism”, to which Reagan was responsive, was simply that America’s business interests were involved, just as between the two world wars were the interests of United Fruit Company in the, literally, Banana Republics of South America. Legislators listen to those citizens that speak, and business directly & through its lobbyists certainly does. We can do the same thing if we make the effort.

  10. August 15, 2018 at 7:13 am

    James, fascism is difficult to define. But fascist governments and movements must include some version of the following. Government led by a dictator having complete power, forcibly suppressing (often with physical violence) opposition and criticism, regimenting all industry, commerce, etc., and emphasizing an aggressive nationalism and often racism. The American version of fascism Gross describes is more like business oligarchs of the “Robber Baron” period in American history. Oppressive and violent, tight control of the American economy, and utter disregard for democracy. With Ronnie Reagan the US began down the path to this newest American fascism. With all the results predicted by Gross. Including Trump’s efforts to make the US the Banana Republic in the new fascist regime.

    • Prof Dr James Beckman, Germany
      August 15, 2018 at 2:31 pm

      Ken, following your thought, “Trump/Putin/Saudi Crown Prince will do anything/say anything to suit his tastes/goals.” The last found ancient trappings of royalty, while the first two took it anyway they could. Fascism=me’ism in a simplistic psychological model. The rest of us are serfs to serve this feudal mindset, it appears.

      • August 16, 2018 at 7:27 am

        James, I agree. People often wrongly believe fascism is new. It’s not. Monarchs and monarchy are fascist ways of life. The Robber Barons are fascists, as is Ronnie Reagan and Margaret Thatcher. Often fascist dictators/monarchs/politicians inspire great loyalty among followers. Thus, explaining their longevity in power.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.