By OSMAN KESHAWARZ
On Jan. 20, 2021, Donald J. Trump stepped down as president of the United States. Trump presided over part of the longest economic expansion in American history, as well as the most severe recession since the Great Depression. The Trump administration’s national economic policy was openly nationalist, “America First,” implementing a series of protectionist trade measures while cutting taxes and increasing public spending. Leaving aside the outcomes, this policy orientation was a drastic departure from the free-trade-and-austerity neoliberal consensus that had dominated states’ policy since the 1980s, and was a reflection of the growing global influence of reactionary populist politics.
Trump’s inaugural “American carnage” speech set the tone for the coming policy of his administration: “The wealth of our middle class has been ripped from their homes and then redistributed all across the world … From this day forward, it’s going to be only America first—America first. Every decision on trade, on taxes, on immigration, on foreign affairs will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs.”
On the campaign trail, Trump harped incessantly on the trade deficit, NAFTA’s destruction of American manufacturing, and racist rhetoric on immigration. It may have been precisely this that flipped the white working-class vote in key districts that allowed him to win in 2016. And for the next four years, the Trump administration’s economic policy focused on this: economic protectionism and the suppression of immigration, along with some tax cuts sprinkled in. His first trade-related action was withdrawal from the Trans-Pacific Partnership (TPP), a free-trade agreement between the United States, Canada, Mexico, and several Asian and Pacific nations that was, ironically, designed to isolate China from the world market.
In 2018, Trump enacted a series of protectionist measures. This began with tariffs on, among other things, steel and aluminum, which triggered retaliatory tariffs implemented by India, Canada, and China. This was the beginning of the centerpiece of the administration’s trade policy: an escalating trade war with China. Citing national security and the theft of intellectual property, the U.S. imposed an escalating series of tariffs on Chinese goods, with the Chinese government responding in kind with tariffs on American consumer goods and agricultural products.
Trump’s protectionist policy was designed to re-invigorate American manufacturing—by increasing the prices that domestic producers and consumers must pay for imported goods and raw materials, domestic industries that produce these things would be more able to compete with lower-cost foreign producers.
How effective were the Trump tariffs? As it turns out, the effects were marginal at best. While prices for American steel increased after the implementation of the tariffs, employment in steel manufacturing increased much more modestly. On the other hand, rising steel prices meant that prices consumers pay for commodities that rely on steel for their production (which is basically everything) went up. The rhetoric around tariffs makes it seem like they are paid by the producers in the country they are imposed on, although the exact opposite is true; tariffs are paid either by whomever imports the commodity, either in the form of the tariff itself or by paying higher prices for the domestically-produced alternative. In the end, costs are passed on entirely to the consumer—profits for the industry protected by the tariff increase, at the expense of everyone who is forced to buy the commodity at higher prices. And while employment in the steel industry did increase, this was more than offset by job losses in other industries, as well as the decimation of American agriculture as a result of retaliatory tariffs.
What of the new president, Joe Biden? As Senator, Biden was firmly in the trade-liberalization camp—he voted both for NAFTA and the entry of China into the WTO, and his tenure as vice president in the Obama administration saw the drafting of the TPP and other free-trade measures. However, he and the Democrats likely sensed how politically toxic the issue had become in the post-Obama era, and is not likely to return to the neoliberal trade consensus, at least not completely. Biden has thus far taken zero action in rolling back any of Trump’s protectionist policy—the China trade war provisions remain in force, as do the tariffs on metals. In fact, Biden re-imposed aluminum tariffs on the UAE, after Trump lifted them, using the same dubious “national security” reasoning that Trump did to justify the imposition of tariffs in the first place. Aside from that, the Biden Administration has been remarkably tight-lipped about issues of trade and protectionism.
Given Obama’s “pivot to Asia” foreign policy approach, focused on counteracting the growing influence of China, it may be that the Trump tariffs are useful to keep around as a bargaining chip. It is also true that the failures of the era of trade liberalization have been made evident in the form of rising populist movements on the left and the right, as well as massively widening global wealth and income gaps. It may be that, for now, both the Democrats and Republicans see the political writing on the wall.
However, free trade is not the ultimate cause of the crisis in the United States, and therefore protectionism is no solution. Although much has been made of the so-called “China shock” that occurred when China joined the WTO, where American manufacturing was lost to overseas producers, manufacturing in the United States has never been better; manufacturing output has continued to grow rapidly over the past two decades, even as manufacturing employment declined. This means that these jobs weren’t lost to China, they were lost to automation—increased capital accumulation by firms in the United States allowed more output to be produced with fewer workers.
Tariffs do little to halt this process—in fact, they likely had the effect of raising the incentives of all firms to mechanize and automate. Ultimately, what drives the distribution of incomes and the suppression of standards of living is the profit motive, and the drive by capitalist firms to reduce labor costs. The choice of Biden to keep or dump Trump’s protectionist policies will, itself, have little influence on that outcome.