What Trump Gets Right On Trade
The New York Times
March 2, 2017
Whatever confusion people might have about President Trump’s agenda, his position on trade and manufacturing is crystal clear. “I believe strongly in free trade, but it also has to be fair trade,” he said in his address to Congress Tuesday night. He called for corporate tax reform and export incentives, and he lashed out at Nafta and China for draining America’s manufacturing base.
Although cheap, labor-intensive goods often come to mind when Americans think of job-displacing imports, the more capital- and technology-intensive segments of manufacturing have hardly been immune. Sectors like motor vehicles and parts, pharmaceuticals, telecommunications equipment, nonelectrical machinery (like machine tools, farm machinery and power-generating turbines) and industrial chemicals add up to nearly half of manufacturing’s enormous, chronic annual trade deficits nowadays.
Since then, moreover, trade deficits in advanced manufacturing have worsened, and the stagnation of productivity growth suggests that the robots have been replacing fewer workers. So trade-related job loss in these sectors surely has grown — and smart, pro-domestic manufacturing policies can bring them back.
The United States is not only the world’s biggest single national economy, but for all its recent sluggishness, it has also generally been the fastest-growing major economy, and it is the most open to imports. That’s why it’s the single largest export market for a fifth of the world’s countries. That’s why it has remained the world’s largest consumer of foreign goods, despite slashing its previously huge purchases of foreign oil. That’s largely why each percentage point of new American growth lifts global growth by much more than similar expansion in China, and nearly as much as growth in the euro area — which unlike the United States is relatively poor in natural resources and needs to buy many more commodities from overseas. That’s also why nearly all leading countries and groupings — including the eurozone — have long-run trade surpluses with the United States.
The United States plays an even more central role in countries that have come into Mr. Trump’s trade crosshairs. Slow-growing Mexico, for example, would be performing much more sluggishly if it were not able to export the equivalent of 28 percent of its annual economic output to the United States. Its auto shipments to America alone are its biggest generator of foreign exchange reserves.
But the official manufacturing job and trade statistics make entirely obvious that the rewards to the American economy will be substantial. And as Mr. Trump’s speech on Tuesday made clear, America has a president who understands its ample power to reap them.