Donald Trump

Trump's Terrible Trade Ideas Would Make America Small and Weak

The presumptive GOP nominee is selling an economic fantasy.



Donald Trump's big speech on the economy yesterday was, not surprisingly, a festival of bad ideas and false statements. But even more than that, it was a rejection of the idea that America should be a fully engaged participant in the modern international economy.

Trump's address was billed as a jobs speech, but its main focus was outlining an intensely protectionist view on trade. In particular, Trump blasted trade deals like NAFTA and the Trans-Pacific Partnership, describing them as tools of powerful special interests. And he lamented what he described as a lack of response from the political class, saying that "when subsidized foreign steel is dumped into our markets, threatening our factories, the politicians do nothing."

Trump is simply wrong about this. As economist Keith Hennessey points out, President George W. Bush imposed steel tariffs on Chinese steel in 2002, and just last month, the Obama administration imposed additional duties on steel from China and a number of other countries. I am not endorsing these actions, but it's incorrect to say that the executive branch has done "nothing" in response to Chinese steel imports.

Okay, so Trump botched the details. No surprise there.

But over the course of his campaign, Trump has made it abundantly clear that the details don't matter. So let's look at his argument more broadly. Basically, his position is that politicians haven't done enough to respond to foreign trade, and that major free trade deals should be ended or substantially renegotiated in order to protect industries like steel from foreign competition.

That's pretty rich from someone so adamantly opposed to trade deals that favor special interests—because Trump's response, it turns out, is essentially that the U.S. government should treat the mid-century manufacturing sector as its own special interest, a special economic class to be protected at all costs, because it represents something iconic about America. 

And make no mistake: The costs would be extremely high. As Hennessey writes, pushing American businesses to rely on more expensive American steel would raise costs for other manufacturers, not only raising the cost of living for most consumers, but raising costs for other industrial employers. Similarly, Trump's proposal to require American infrastructure projects to be created with American steel wouldn't create jobs, as Trump claims, but would limit the number of projects that could be constructed, and thus reduce the number of potential jobs.

Meanwhile, Trump's focus on mid-century manufacturing jobs simply ignores the evolving and dynamic nature of the American economy. Yes, Pittsburgh, Pennsylvania, has lost 5,100 steel-worker jobs in recent years—mostly because of innovation and productivity improvements, not trade—but it has also gained 66,000 health care jobs over the same time frame. But modern health care jobs aren't iconic in the way that trade jobs are. 

Trump's anti-trade rhetoric is as much symbolism as it is policy. It's a vehicle for a specific kind of economic fantasy, in which the American economy somehow returns to its twentieth century structure, and then stays that way, static and unchanging, forever. 

That's just not how economies work. And even if somehow the old economy could return, it still wouldn't be able to support all of the demographic, workforce, and technological changes we've seen over the last few decades. The old economy was slower and smaller, and evolved in part because of the need to scale up. 

In any case, even the most aggressive anti-trade policies aren't going to return the country to the economy of fifty years ago.

What they would do, however, is cut off the United States from the world economy, making both Americans and the rest of the world substantially poorer in the process.

Perhaps as importantly, that sort of severing of international trade ties would dramatically reduce America's standing in the world—and rightly so. Trump speaks often about rebuilding America's global standing, but his trade policies would do incredible damage to the nation's international reputation. Instead of making America great and strong, Trump would make it small and weak.