Analysis by the NBER, the official arbiter of US recessions, shows Trump’s tariffs achieved nothing, economically speaking. Retaliations cost US jobs. But politically, tariffs are popular.
The NBER shows Tariffs did not increase employment in protected sectors but did increase Republican vote share.
No Help for the Heartland
Please consider Help for the Heartland? An analysis of the Employment and Electoral Effects of Trump’s Tariffs.
Much of the analysis is stuff only math geeks can follow. Here are a few readable, easy to understand snips.
Abstract
The trade-war has not to date provided economic help to the US heartland: import tariffs on foreign goods neither raised nor lowered US employment in newly-protected sectors; retaliatory tariffs had clear negative employment impacts, primarily in agriculture; and these harms were only partly mitigated by compensatory US agricultural subsidies. Consistent with expressive views of politics, the tariff war appears nevertheless to have been a political success for the governing Republican party. Residents of regions more exposed to import tariffs became less likely to identify as Democrats, more likely to vote to reelect Donald Trump in 2020, and more likely to elect Republicans to Congress. Foreign retaliatory tariffs only modestly weakened that support.
Introduction
The stated goal of the Trump administration’s trade policy was “to bring back jobs to America.” A secondary goal of the policy was presumably to build political support in places hurt by trade with China. While these goals are nominally aligned, they are not mutually dependent. If the trade war conveyed political solidarity with voters in import-competing sectors and locations, its tangible consequences for jobs may be secondary to its political consequences. This paper jointly considers the employment and political consequences of the trade war, focusing on impacts at the level of detailed geography, where employment and voting intersect.
Our main results are as follows: import tariffs on Chinese and other foreign goods had neither a sizable nor significant effect on US employment in regions with newly-protected sectors. Foreign retaliatory tariffs by contrast had clear negative employment impacts particularly in agriculture, and these harms were only partly mitigated by compensatory subsidies. Despite the trade war’s failure to generate substantial job gains, it appears to have benefited the Republican party, consistent with expressive views of politics. Residents of regions more exposed to import tariffs became less likely to identify as Democrats, more likely to vote to reelect President Donald Trump in 2020, and more likely to elect Republicans to Congress. Foreign retaliatory tariffs only modestly weakened that support. The electoral gains were concentrated in regions that had suffered from a rapid growth of Chinese import competition in the 1990s and 2000s, and whose industries now received a relatively large import tariff protection.
Why Didn’t US import Tariffs Help Targeted Regions?
The absence of a sizable employment response to US tariffs may be partly the result of trade diversion. Buyers facing tariff-induced price increases on Chinese imports may have found alternative sources of foreign imports, rather than purchasing a larger quantity of goods from domestic tariff-protected industries that could spur domestic employment growth. Fajgelbaum et al. (2021) find that in response to higher US tariffs on China, other countries substantially expanded their exports to the United States. The same was not true for US exports, as industries facing retaliatory tariffs struggled to expand sales in other export markets. The uneven response of US imports and exports to the trade war may reflect differences in the nature of the underlying goods. US exports to China are primarily agricultural products, which tend to have relatively high trade cost elasticities; US imports from China consist primarily of manufacturing goods, which tend to have relatively low trade cost elasticities.
Conclusion
We evaluate whether the tariff war between the United States, China and other US trade partners in 2018–2019 succeeded in meeting then-President Trump’s stated goal of bringing back jobs to America, and generating support for Trump and the Republican party. We find consistent evidence on both questions. The net effect of import tariffs, retaliatory tariffs, and farm subsidies on employment in locations exposed to the trade war was at best a wash, and it may have been mildly negative. US import tariffs had either insignificantly negative or insignificantly positive employment effects; retaliatory tariffs had a consistent and significant negative employment impact; and only a minor part of these adverse effects were offset by agricultural subsidies.
Conversely, the trade war appears to have been successful in strengthening support for the Republican party. Residents of tariff-protected locations became less likely to identify as Democrats and more likely to vote for President Trump. Although retaliatory tariffs were more effective in reducing employment than import tariffs were in boosting employment, retaliatory tariffs were less effective in reducing Republican electoral support than import tariffs were in boosting Republican electoral support. Voters thus appear to have responded favorably to the extension of tariff protections to local industries despite their economic cost. Although the goal of bringing back jobs to the heartland remained elusive, voters in regions that had borne the economic brunt of Chinese import competition in the 1990s and 2000s were particularly likely to reward the Trump government for its tariff policy.
Big Surprise and No Surprise
I am not at all surprised by the economic impacts. Tariffs are counterproductive yet popular.
However, I am surprised to see the NBER do research on political outcomes. Perhaps I shouldn’t be. Admittedly I have not closely followed their research to know if they frequently do political analysis of economic data.
Union Concern Over EVs
One of the big fears of the auto unions is the fact that EVs contain fewer parts and the manufacturing will be more automated.
Technology improvements mean fewer workers are needed. Yes, the US outsourced some jobs to China and Vietnam.
But China and Vietnam then outsourced them to robots. Pease note that the jobs outsourced to robots are never coming back regardless of where the manufacturing takes place.
Huge Trade War No Matter Who Wins
On December 26, 2023 I commented Trump Calls for Eye-to-Eye Tariffs, Huge Trade War No Matter Who Wins
Trump and Biden are in ever-escalating tariffs proposals. Let’s discuss Trump’s latest proposal and why It’s a trade war we cannot win.
In campaign documents and media interviews, Trump has floated placing a tariff of 10% on all imported goods and matching tariffs on trading partners with higher rates “an eye for an eye, a tariff for a tariff.” He wants to revoke normal trading relations with China, a legal step that would automatically raise levies on everything from toys and aircraft to industrial materials.
Biden administration officials, long divided over trade policy, have left in place Trump-era tariffs on roughly $300 billion of Chinese goods. But officials at the White House and other agencies are debating the levies again, the people said, with an eye on wrapping up a long-running review of the tariffs early next year.
Critical Materials Risk Assessment by the US Department of Energy
Please consider Critical Materials Risk Assessment by the US Department of Energy
Rare earth elements go into weapons guidance systems, batteries, wind turbines, cell phones, flat-screen TVs, magnets, mercury-vapor lights, and camera lenses.
The US is heavily dependent on China for nearly everything in that red critical square.
Check it out.
So, how might China retaliate?
An Epic Battle Between Ford and GM
On September 30, 2023, I noted An Epic Battle: Ford to Use China’s Battery Technology, GM Wants it Blocked
Toe-to-Toe Who’s More Foolish?
Since tariffs are a tax on consumers, Trump is proposing a huge tax hike. Biden is on fully on board.
China will retaliate and so will Europe. Costs will soar across the board. More inflation is on deck.
Irony abounds. How can tariffs help both candidates?
Tarrifs accomplished intended purpose all thru 19th centery, thats stronger legacy than a globalist talking point over 2 years period
The US grew to be an industrial power house when tarrifs were the prime revenue stream for the federal government. Looking a bandaid and crowing about their failures is not a reflection of the needs for tarrifs. This took decades to fall into this hole. It will take decades to crawl back out of this hole. There are no easy answers all avenues will require pain.
Apologies for ths numerous typos. An edit feature would be nice
Yeah, and when applied to the slave state’s cotton it helped fund Northern canal building and led to the Taney Court’s Dredd Scott decision and Southern secession with Lincoln’s ascension, admittedly not a problem with China’s current slave and child labor for Nike and the current illegal cross border drug markets. And at least the Chinese execute their convicted killers, unlike half the US states ignoring those capital punishment requirements in the bill of rights, thus giving their ruling oligarchies made up of Nikes and Bloombergs and Mexican cartels and exemption from the death penalty for their systemic murders, er mass deaths, as in senior health care facilities due to the Chinese virus. It’s all good Alex, like clockwork orange. . .
YES: everyone KUMBAYA:
MORE TAXES, MORE TARIFFS & MORE VAT, MORE INCOME TAXES, MORE SALES TAXES!!!!!!!!
MORE MORE MORE!
The problem with some of you here being in favor of MORE taxes on us, in the form of Tariffs, you are suggesting that the Government should also implement all sorts of extra taxes!
How about you nincompoops making a better statement: CUT PRICES, NO MORE TARIFFS, and NO MORE TAXES.
If you cannot be open-minded enough to THINK about Tariffs, and other forms of inflationary pressures, then I am asking you to STFU about it. If you are not smart enough to comment, STFU.
Have a good day.
No Don. I’m suggesting replacing one tax for another. Tarrifscombined with a reduction of tax on industry would incentivize industry to move manufacturing back to the US.
A clear Hatch Act violation…
The US is heavily dependent on China for nearly everything in that red critical square. So, how might China retaliate?
Well isn’t this the freaking problem? We can’t rely on our adversaries. We need to bring critical industries including mining and manufacturing here to the US. If we need to pay higher prices for national security, so be it.
Tariffs are an IMMEDIATE TAX on us but the POOR are the most vulnerable and thus when WE (YOU!) debate the impact of inflation, and do so in the VACUUM of being the most capable of paying extra, I find that you are bordering on the ridiculous with your flippant statement: “If we need to pay higher prices for national security, so be it.:
When you say, “so be it” you are suggesting that the most impacted can afford to pay more and nothing can be further from reality.
I am no longer wanting to vote for Pres. Bayleaf.
If US wants the jobs back, it needs a more competitive industry.. Trump or Biden can impose tariffs, but can’t avoid brasilian, african or australian buying chinese goods.
The VAT (Value Added Tax) as Eurozone, China, and Japan utilize is the best means to implement trade policy. Importers will scream since they pay the tax initially then pass some or all of the costs onto the manufacturer, distributor and/or consumer groups in the non farm sector.
The VAT can be adjusted for those taxpayers that are below the 80% decile through a progressive or flat rebate or combination thereof.
Domestic companies competing with US exporters will have a competitive advantage.
Strike US exporters and replace with US importers.
Your moniker is unfortunate. FDR was one of the worst US Presidents.
Support or refute the VAT based upon facts, events, practicality, test of time etc., instead of ad hominem.
Your response is vacuous.
The sooner Washington DC and the Beltway go the way of Atlantis, the better for the Heartland.
The linked report –
NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA
I think the more important question is, “How free can a market be without introducing vulnerabilities to national security?” National security DOES have a price to be paid. The price paid now is higher (insurance premium) for an item manufactured domestically than overseas. The eventual future price is to re-alignment vulnerable parts of the economy that have become compromised to foreign entity. The far future price is the foreign entity exercises its influence over our national sovereignty by refusing to sell critical parts or materials used in military applications, which definitely means an immediate decrease in quality of life, and most likely a tremendous loss of life to the military and civilians.
The counter argument to allowing free trade; therefore, is that trade is presently being weaponized so that at least one trade partner will not benefit in the future. Limited trade is a better solution because it limits or avoids the worst possible outcome of a completely free market system.
FDR advocating trade embargoes against Japan pre WW II is the poster child of what smart leadership enacted. The downside was the Japanese attack on Pearl Harbor in attempt to cripple the other viable military power in the Pacific.
Farmers did just fine with the trade war (and help from COVID) with USDA financial support which came at a cost to everyday Americans in the form of inflation.
Dept of Ag does not represent Joe Six Pack and Jane Doe.
No Alphabet Agency does.
Rare earth elements are not rare. Both USA and Canada have large deposits. Rare earth refining kills Chines labor from toxic exposure that is not permitted in USA. Robots may substitute for dead Chinese laborers. We’ll see.