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China Trade War Didn’t Boost U.S. Manufacturing Might

The Wall Street Journal reports China Trade War Didn’t Boost U.S. Manufacturing Might.

President Trump’s trade war against China didn’t achieve the central objective of reversing a U.S. decline in manufacturing, economic data show, despite tariffs on hundreds of billions of dollars of Chinese goods to discourage imports.

The tariffs did succeed in reducing the trade deficit with China in 2019, but the overall U.S. trade imbalance was bigger than ever that year and has continued climbing, soaring to a record $84 billion in August as U.S. importers shifted to cheaper sources of goods from Vietnam, Mexico and other countries. The trade deficit with China also has risen amid the pandemic, and is back to where it was at the start of the Trump administration.

Another goal—reshoring of U.S. factory production—hasn’t happened either. Job growth in manufacturing started to slow in July 2018, and manufacturing production peaked in December 2018.

Small Success With China, Bigger Losses Elsewhere

An industry-by-industry analysis by the Federal Reserve showed that tariffs did help boost employment by 0.3%, in industries exposed to trade with China, by giving protection to some domestic industries to cheaper Chinese imports.

But these gains were more than offset by higher costs of importing Chinese parts, which cut manufacturing employment by 1.1%. Retaliatory tariffs imposed by China against U.S. exports, the analysis found, reduced U.S. factory jobs by 0.7%.

Trade Wars are Good and Easy to Win 

In March of 2018 Trump boldly announced in a series of Tweets "Trade Wars are Good and Easy to Win"

These were my comments:

Trade Wars Not Winnable

Those who say trade wars are winnable aren't thinking, they're spouting nonsense.

Economic Madness

The bottom line is simple: If its good for the consumer, it's good policy.

Instead, Trump is promoting trade wars that mathematically cannot be won.

For a mathematical explanation of trade deficits, please see Trump's Tariffs Show He's "Clueless About Trade".

Also consider Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Updated Picture

US Manufacturing Employment 2020-09A

NAFTA Not to Blame

The WSJ inspired this update but I have blasted Trump's tariff nonsense for years.

Manufacturing peaked 14.5 years before NAFTA. Then manufacturing rose for years after NAFTA (but never reached that peak again).

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This all goes back to August 15, 1971 when Nixon ended gold convertibility. 

At that time, Nixon’s treasury secretary John Connally famously told a group of European finance ministers worried about the export of American inflation that the dollar is our currency, but your problem.”

Let's revise Connally's statement to make it current.

“Our Currency And Our Problem”

The source of global trading imbalances, soaring debt, declining real wages, and the massive rise of the 1% at the expense of the bottom 90% followed after Nixon closed the gold window.

In response, US budget deficits soared, US treasuries became a key export.

It is impossible for tariffs to fix these fundamental problems especially after Republicans joined the Democrats in no longer giving a damn about deficits. 

The Fed exacerbated the problem with cheap money and low interest rates to spur the economy. 

In the process the Fed blew three economic bubbles in succession, each with a bigger amplitude.

Finally, due to robotics, manufacturing jobs are shrinking everywhere, even China.

If you think tariffs will bring back jobs in this setup, you may as well believe in the tooth fairy.


I originally posted NAFTA started January 1, 1974. It should have been January 1, 1994. The chart showed the label in the correct place but I mistyped the date. 

Mike “Mish” Shedlock