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Trade 101 for Trumpies

Trade 101 for Trumpies

Posted on February 7, 2025 by Dan Mitchell

To augment my four-part video series about trade (dealing with the WTO, creative destruction, deficits, and economics), here’s part of my recent lecture about Trump’s trade policy to the Universidad de Libertad in Mexico City

For those who (mistakenly) want to skip the video, my speech focused on these five themes.

  • Trade deficits don’t matter.
  • Trade and jobs.
  • Trump’s 1st-term failure.
  • Trade openness and prosperity.
  • Trade and China.

For today’s column, I want to expand on the second point to help people understand why protectionism is a net job destroyer.

Let’s start by looking at a chart of manufacturing jobs during Trump’s first term. Notice that jobs were rising at a good clip (perhaps due in part to the 2017 legislation that reduced the corporate tax rate), but that upward trajectory reversed once Trump launched his trade war with China.

The chart comes from an article by Brad Polumbo for the Foundation for Economic Education.

Here’s some of his analysis.

President Trump was elected on an anti-trade agenda in 2016, and promised that tariffs and protectionist measures could restore the US manufacturing sector. After winning the White House, the president imposed tariffs on hundreds of billions of dollars worth of Chinese goods meant to discourage imports in pursuit of this goal. …This graph shows pretty clearly that Trump’s tariffs did not successfully promote employment in the manufacturing sector. Much of the manufacturing job gains that did occur during the president’s tenure happened before the tariffs even took effect. …“Tariffs that save jobs in the steel industry mean higher steel prices, which in turn means fewer sales of American steel products around the world and losses of far more jobs than are saved,” famed free-market economist Thomas Sowell explained in one example of how tariffs backfire. …Yet as economists agree, the problem with tariffs generally speaking is that they kill more jobs than they create. For every job that is “protected” by a tariff, other jobs are lost in related industries that use the targeted good as an input and see their costs raised. But even within the manufacturing sector, these tariffs failed.

I’ll close with a couple of comments about China.

As I explained at the end of the above video, it’s possible that free trade with China is not a good idea, depending on one’s views on foreign policy.

I’m not an expert on that, so I don’t have a firm opinion – except that any restrictions on trade should be expressly limited to potentially hostile nations.

For the rest of the world, we should have free trade based on mutual recognition.

Sadly, I don’t think that’s what Trump is aiming for.

———
Image credit: DonkeyHotey | CC BY-SA 2.0.


Donald Trump Economics jobs Protectionism Trade
February 7, 2025
Dan Mitchell

Dan Mitchell

Dan Mitchell is co-founder of the Center for Freedom and Prosperity and Chairman of the Board. He is an expert in international tax competition and supply-side tax policy.

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