Protectionism

Hey Trump, American Manufacturing is Doing Just Fine

Don't ruin it with protectionist trade policies.

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Trump in Kenosha, Wisconsin
Mark Hoffman/TNS/Newscom

Trump talks about America's manufacturing sector like he's delivering a eulogy. "Rusted out factories are scattered like tombstones across the landscape of our nation," he said in his inaugural address. "The wealth of our middle class has been ripped from our homes and redistributed all cross the world."

That isn't the only apocalyptic note the president has struck on the subject. He talks like that all the time, particularly when pitching his protectionist agenda. In the months since taking office, Trump has slapped Canadian lumber and airplanes with hefty tariffs and has launched investigations into Chinese steel.

But American manufacturing is actually experiencing something of a boom right now.

According to Institute for Industrial Supply Management's widely watched index on manufacturing output, American manufacturers are humming along at a 13-year high.

The institute surveys 300 industry executives on their hiring, inventories, supply orders, and levels of production, which it combines with stock prices to produce a final index score. Anything over 50 implies manufacturing is growing. Yesterday the score hit 60.8, the highest it's been since May 2004.

Dan Ikenson, a trade policy analyst with the Cato Institute, says the whole idea of a decline in American manufacturing is a myth.

"In absolute terms, the value of U.S. manufacturing has been growing continuously, with brief hiccups experienced during recessions over the past several decades," he testified to Congress in March. According to the St. Louis Federal Reserve, American manufacturing output has been growing continuously in real terms for decades, and is currently at an all-time high.

It is true that the number of manufacturing jobs has declined in real terms, after reaching a peak in 1979—something else Trump is quick to bemoan. But technology, not trade, has largely driven that decline. Tariffs wouldn't have stopped that.

Besides, the purpose of manufacturing of is to make things, not jobs. "You shouldn't just be creating jobs for the sake of creating jobs," says Matthew Mitchell, an economist at George Mason University, adding that "the concept is unfortunately lost on most policy makers."

Monday's numbers also show remarkable resilience in the face of damage done to industrial areas in Texas and the American Southeast by hurricanes Harvey, Irma, and Maria—much to the surprise of many industry analysts.

"The economy appears to have taken the punch and rolled with it," Ian Shepherdson, chief economist at Pantheon Macroeconomics, tells The Wall Street Journal.

But what natural disasters can't destroy, protectionist policies certainly can. Tariffs don't just raise the cost to consumers; they mean American producers spend more for products as well.

Trump's lumber tariffs have been eaten by U.S. homebuilders, who now have to pay 20 percent more for this particular building material. Or take Trump's fervent desire to slap tariffs on imported steel. As Ikenson told Reason back in April, "Steel counts for .3 percent of GDP and employs 80,000 workers"—numbers dwarfed by the industries that buy steel to make their own products. By imposing tariffs, said Ikenson, "we are hurting downstream workers which employ 70 workers for every steel worker."

In short, American manufacturing is thriving right now. Trump shouldn't ruin that with trade barriers.

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17 responses to “Hey Trump, American Manufacturing is Doing Just Fine

  1. But American manufacturing is actually experiencing something of a boom right now.

    Well, yeah, now that Trump’s policies have had time to work.

  2. Besides, the purpose of manufacturing of is to make things, not jobs. “You shouldn’t just be creating jobs for the sake of creating jobs,” says Matthew Mitchell, an economist at George Mason University, adding that “the concept is unfortunately lost on most policy makers.”

    Yeah, well, things don’t go out and vote. The point isn’t lost on policy makers so much as policy makers are directly incentivized to ignore the point.

    1. Yeah, well, things don’t go out and vote.

      Yet.

  3. It is true that the number of manufacturing jobs has declined in real terms, after reaching a peak in 1979?something else Trump is quick to bemoan. But technology, not trade, has largely driven that decline. Tariffs wouldn’t have stopped that.

    That is just objectively not true. There is a case to be made for free trade. But the case isn’t “it will never cause us to lose any manufacturing jobs.” Trade absolutely cost the US manufacturing jobs as they moved to lower wage countries overseas. The case to be made in defense of that is that the US benefited from the access to cheaper consumer goods more than it was harmed by the loss of the manufacturing base.

    That is a perfectly reasonable argument to make. What is not reasonable is blowing smoke up people ass and making objectively false statements like the one above. Just tell the damned truth and make an honest argument.

    1. Trade does not happen in a vacuum. Exporting goods is just half the equation, the other half is imports. When we export we balance it with imports either directly or indirectly. If we don’t get goods in return we get money which we can use later to get goods. It balances in the end. Trade deficits are a fiction invented by mercantilists.

      We’re not losing jobs to trade. We may be shifting jobs around, but we aren’t losing them through trade.

      1. We are losing jobs. Remember we borrow tremendous amounts of money from overseas. We are paying for those goods by borrowing the money.

        1. I don’t understand the connection between those two ideas.

          1. So, I am asking you to clarify, not putting your statement down.

  4. So, manufacturing is higher than it’s been for 13 years.

    And this has happened since Trump took office.

    And you think Trump’s the problem? The problem with what, exactly?

    1. SOMEBODY only read 1/3 of the post.

      1. Do you think that’s something to be proud of?

        Go back and read the whole thing so you can understand my response.

  5. RE: Hey Trump, American Manufacturing is Doing Just Fine
    Don’t ruin it with protectionist trade policies.

    Protectionist policies from the GOP?
    Gee, I thought only democrats did that.
    What’s the difference between the republicans and democrats again?

    1. Spelling

  6. Is this a case of watching what Trump Does versus what he Tweets? Have any protectionist policies actually been implemented?

    Might it be a case of negotiating to get other countries to give up their own protectionist policies? Such would be consistent with the approach described in “The Art of the Deal.”

    1. And that’s exactly how we should do it. We should have required that before we opened up to most of these countries, but doing it retroactively is better than never doing it. China has a natural price advantage anyway, they don’t need to knee cap our products any more than they are naturally.

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