The sweeping tariffs imposed by former President Donald J. Trump on China and other American trading partners were simultaneously a political success and an economic failure, a new study finds. That’s because the levies won over voters to the Republican Party even though they didn’t bring back jobs.
The bipartisan working paper examines monthly data on U.S. employment by industry and finds that tariffs that Mr. Trump imposed starting in 2018 on foreign metals, washing machines and a range of goods from China neither increased the total number of jobs in the affected industries lowered industries.
But the tariffs prompted other countries to impose their own retaliatory tariffs on American products, making them more expensive to sell abroad, and those levies negatively affected American jobs, the paper said. This was particularly true in agriculture: farmers who exported soybeans, cotton and sorghum to China were affected by Beijing’s decision to increase tariffs on these products to up to 25 percent.
The Trump administration sought to offset these losses by offering financial support to farmers, ultimately spending $23 billion in 2018 and 2019. But those funds were unevenly distributed, a government assessment found, and economists say those subsidies would have only partially mitigated the damage caused by the tariffs.
The findings contradict Mr. Trump’s claims that his tariffs have helped undo some of the damage caused by competition from China and brought back American manufacturing jobs that moved abroad. The economists conclude that the overall impact of the three measures — the original tariffs, the retaliatory tariffs and the subsidies given to farmers — on U.S. jobs “was at best a non-starter and may have been slightly negative.”
“Of course, one can reject the hypothesis that this collective bargaining policy was very successful in restoring jobs in the industries that were heavily affected by this wage war,” said one of the study authors, David Dorn of the University of Zurich, in an interview.
Still, the researchers’ work suggests that aggressive tariffs on foreign products were a political success for Mr. Trump and the Republican Party.
The study draws on vote-counting data in presidential and congressional elections and suggests that people living in areas affected by the tariffs – particularly the Midwest, the Great Lakes area and the South – are more likely to Re-election of Mr. voted. Trump in 2020. They were also less likely to identify as Democrats and more likely to elect Republicans to Congress, according to the newspaper.
These political beliefs were not entirely immune to economic impacts: Republican electoral gains were stronger where tariffs and subsidies had a more positive impact on the labor market. And the retaliatory tariffs that other countries imposed in response to Mr. Trump’s tariffs weakened support for Republicans, but only slightly, the paper said.
Still, the economists speculate that voters in areas hit hard by economic competition from China in recent decades may have valued the tariffs “as a sign of political solidarity” rather than for the actual impact they had on jobs.
“People respond very positively from a Republican perspective to import protection for their local industry,” Mr. Dorn said, “but they don’t punish Republicans as much when their location is subject to retaliatory tariffs.”
In addition to Mr. Dorn, the authors of the study are David Autor from the Massachusetts Institute of Technology, Anne Beck from the World Bank and Gordon H. Hanson from the Harvard Kennedy School.
Mr. Autor, Mr. Dorn, and Mr. Hanson have conducted influential research on the “China shock,” which quantified the extent to which China’s entry into the World Trade Organization has reduced U.S. manufacturing employment. In their later work, they examined how these job losses influenced political trends in the US heartland, leading to, among other things, political polarization and increased support for Republicans.
Mr. Dorn said the American economy grew strongly during the trade war, which may have influenced voters’ perceptions of the tariffs’ impact. “It’s the famous ‘It’s the economy, stupid,'” he said.
“It is very, very difficult for people to completely isolate the reason why the economy is doing well,” Mr. Dorn added. “Is the economy doing well because of a particular government policy or is the economy doing well despite the government policy?”
The results come at a time when Mr. Trump is promising even more aggressive trade measures as a candidate in 2024. Mr. Trump has touted his previous tariffs as a success and proposed, if re-elected, that he would introduce an even larger tariff program, including a 10 percent “base tariff” on all imported goods.
Both Democrats and Republicans have shown increasing willingness in recent years to put protections in place for American industry after decades of rapid trade expansion, globalization of supply chains and the relocation of many U.S. factories abroad.
While Mr. Biden has reduced some of the tariffs imposed by Mr. Trump, such as those on Europe, he has maintained China tariffs and other measures. Biden administration officials are also debating whether to further raise tariffs on some strategic products such as electric vehicles.
Proponents argue that tariffs stop China from flooding the United States with cheap goods, protect vulnerable American manufacturing industries and generate revenue for the federal government.
Critics say the tariffs simply raise prices for American consumers and place a particular burden on lower-income people who spend more of their money on goods. Tariffs also increase costs for American factories that rely on foreign inputs, which can make U.S. products more expensive and less competitive internationally.
During Mr. Trump’s term, average U.S. tariffs on Chinese goods rose from 3.1 percent to 21 percent in just two years, while average Chinese tariffs on U.S. goods rose from 8 percent to 21.8 percent, it said in the study.
The study’s authors say it’s not exactly clear why import tariffs haven’t led to more jobs in the United States. One possibility is that companies simply imported products from lower-cost countries other than China, a trend visible in the trade data.
In some cases, Mr. Dorn said, U.S. industries that received import protection ultimately had higher sales; One possibility is that American companies found that they could raise their prices after imposing tariffs without increasing their production.
It remains an open question whether tariffs, which did not lead to significant employment gains during the trade war, could create more jobs over longer periods of time, the paper said.
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2024-02-02 10:03:25
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