President Donald Trump's trade policies during his first term have "failed to stop offshoring or the erosion of the U.S. manufacturing base," and his administration's mishandling of the coronavirus pandemic has erased much of the progress made in the wake of the 2008 finanical crisis, according to a report released Monday.
"Unless steps are taken now—to reform our trade policy, to curb dollar overvaluation, to eliminate tax incentives for offshoring, and to rebuild the domestic economy—there won't be a comeback."
—Rob Scott, EPI
The new report authored by Robert E. Scott, senior economist and director of trade and manufacturing policy research at the Economic Policy Institute (EPI), challenges the narrative from the president and key figures in his administration that the era of offshoring U.S. jobs is "over" thanks to Trump's trade agenda.
In spite of claims from the Trump administration, Scott wrote, "the United States has not begun to address the root causes of America's growing trade deficits and the decline of American manufacturing. Decades of trade, currency, and tax policies that incentivized offshoring, combined with an utter failure to invest adequately in infrastructure and good jobs at home, have contributed to growing inequality and an eroding middle class."
"President Trump's erratic, ego-driven, and inconsistent trade policies have not achieved any measurable progress, despite the newly combative rhetoric. On top of that, Covid-19—and the administration's mismanagement of the crisis—has wiped out much of the last decade's job gains in U.S. manufacturing," he added. "Unless steps are taken now—to reform our trade policy, to curb dollar overvaluation, to eliminate tax incentives for offshoring, and to rebuild the domestic economy—there won't be a comeback."
At Whirlpool in OH last week, Trump claimed that he had kept all his trade promises from 2016, but he has NOT. See: my new report: We can reshore manufacturing jobs, but Trump hasn’t done it https://t.co/veVPqPkM4q
— Rob Scott (@RobScott_epi) August 10, 2020
Scott's analysis comes in the midst of an economic crisis triggered by the ongoing pandemic and follows recent remarks from Trump and Robert E. Lighthizer, the U.S. trade representative appointed by the president, suggesting that the administration's trade policies—such as the U.S.-Mexico-Canada Trade Agreement (USMCA)—are helping American workers.
"The Trump administration has taken credit for 'reshoring' manufacturing jobs, but the data show that isn't true. Nearly 1,800 factories have disappeared under Trump between 2016 and 2018," Scott said in a statement. Overall, Scott found, the U.S. has lost over 91,000 manufacturing plants and nearly five million manufacturing jobs since 1997. The country also experienced a net loss of plants ever year between 1998 and 2018, the last year for which data are available.
Scott's report lays out "what the data actually show about the purported 'blue-collar boom'" under Trump:
The U.S. gained roughly 500,000 U.S. manufacturing jobs from 2016 to 2019. But these gains are exactly on par with gains across the entire economic recovery period from 2010 to 2019, during which 166,000 manufacturing jobs were gained each year, on average. The 2016–2019 gains did not represent an improvement over prior years in that decade, and even the decade's overall gains had managed to restore only a fraction of the jobs lost in the prior decade.
And recent years' manufacturing gains were abruptly wiped out by the Covid-19 crisis—with a staggering 740,000 manufacturing jobs lost this year... If President Trump wants to take credit for the job growth at the tail end of a decade of recovery from the Great Recession, then he must also own this collapse, thanks to his administration's mismanagement of the pandemic—including a refusal to organize an effective national response.
The report notes that although data from June 2020 "show an upswing in manufacturing jobs, more recent jobs data indicate that the nascent and partial recovery in manufacturing is at risk due to recurrence of Covid-19 in states that have reopened, including many in the South and Western United States."
"Additionally, the U.S. trade deficit in manufactured goods rose significantly between 2016 and 2019," Scott said. A country's balance of trade is the difference between the value of its imports and exports over a certain period of time. A country has negative trade balance or trade deficit if it imports more than it exports.
"In fact, the real U.S. trade deficit has increased in every year since 2016, reducing GDP growth by roughly 0.25% annually over the past three years," the economist explained. "Compounded with the devastation left by the coronavirus pandemic, the blue collar manufacturing workers need serious help from policymakers."
Scott specifically pointed out how the rising real value of the U.S. dollar, which has climbed nearly 23% since 2014, is a "major cause" of the United Sates trade deficit. "More than half of that rise has come since the Trump tariffs were first imposed in March 2018," the report says. "This stronger dollar keeps making U.S. exports more expensive and imports cheaper."
"Equally problematic, the 2017 Trump tax cuts on corporate profits incentivized offshoring for certain types of production while also raising after-tax profits," the report adds. "This has attracted more foreign capital to U.S. stock markets, spurring the dollar even higher. The dollar has also been driven higher during the coronavirus recession by 'safe haven' effects, with foreign capital surging into the U.S.—as it does during most global downturns."
After noting that the loss of manufacturing jobs was a key issue for voters in the 2016 election, when Trump defeated Democratic presidential candidate Hillary Clinton, Scott's report calls for a recovery from the Covid-19 crisis that includes "major investments in infrastructure and clean energy" and for progressives to "reshape their approach to trade."
"Trade rebalancing, infrastructure, and climate investments could create 17 million good jobs and rebuild the American economy"
"We can reshore manufacturing jobs, but Trump hasn’t done it"
— John Schmitt (@jschmittwdc) August 10, 2020
The report says that "for the past three decades, mainstream Democrats have tied their fates to the twin mantras of free trade and globalization, which have cost millions of jobs and many thousands of factories," pointing to the failed Trans-Pacific Partnership agreement backed by former President Barack Obama and the North American Free Trade Agreement (NAFTA) signed by former President Bill Clinton, which Trump replaced last year with USMCA.
"It is time for progressives to own and reject these failed policies, and to build and campaign on a plan to develop a 21st-century New Deal for the domestic economy."
"It is time for progressives to own and reject these failed policies, and to build and campaign on a plan to develop a 21st-century New Deal for the domestic economy," the report declares. "In 2016, Donald Trump campaigned against globalization and these failed trade deals—which have clearly hurt U.S. manufacturing."
"It worked. He captured nearly 80% of the electoral votes in the top 25 manufacturing states... But he has since failed to deliver for working Americans," the report continues. "Now the wheels are coming off. It's time for a meaningful rewrite of failed U.S. trade and economic policies—all urgently needed to revive the U.S. economy at a critical time."
Trump is expected to face off against presumptive Democratic candidate Joe Biden, Obama's vice president, in November. "Biden has recently proposed major investments in infrastructure, climate, and rebuilding manufacturing," Scott wrote. "These proposals could make a substantial contribution to meeting U.S. investment needs and generating a strong, sustainable, broadly shared recovery."