Podcast: Rethinking Trade – Trade Deficit
Rethinking Trade - Season 1, Episode 18
Candidate Trump pledged he would swiftly eliminate the huge job-killing U.S. trade deficit, end job outsourcing and rebuild manufacturing. Did he? The government collects data on each issue, and it’s been a triple fail.
Transcribed by Garrett O’Brien
Ryan:
Welcome back to Rethinking Trade, where we don’t just talk about trade policy, we fight to change it. I’m Ryan, and I’m joined once again by our in-house trade expert Lori Wallach.
Amongst the daily diet of Trump lies, we hear a whole lot about his great trade achievements. Thankfully there’s actually data that tracks these outcomes and we’ve been tracking that data. What are the big numbers you see Lori, and what do they mean on the ground?
Lori:
So, Trump came up with a bunch of pledges that he would transform our trade policies. He said he would get rid of the trade deficit which is ginormous and is a drag on growth but also represents us importing things we used to make here instead of employing people to make the things we buy. He said that he would end job outsourcing meaning US companies relocating production to low wage countries to make things that they then ship back here to sell, that they used to make here, and he said he would do all of this quickly and he also said he would rebuild manufacturing and the government actually tracks every month what US trade balances and flows are. So, we have trade deficit data and it’s the same measure over time so we can compare it to before he was in office, same thing with the jobs data. So, the big top line I would say is that if you compare the trade deficit in Trump’s last year of this term in office and you got 7 months of data by the beginning of September, we had seven months of data for 2020, its almost 13% higher, the trade deficit, than when he entered office. So, not only didn’t he get rid of what he identified as a job-killing trade deficit but in fact the Trump trade deficit is bigger than say the same period in the last year of the Obama administration.
Ryan:
Another data point that we pulled out is that the July 2020 deficit is the largest monthly deficit since July of 2008.
Lori:
In the midst of the financial crisis. Yep. So, not only is that pretty stunning but also, the fact that the 340-billion-dollar trade deficit in the first 7 months of 2020 is larger than the already ginormous 300 billion dollar deficit during the same period during 2016, it’s also in the context of the COVID crisis having crashed trade volumes. So, we see that the actual overall flow in trade is down and as a result we see that if you compare 2020 to 2019 the deficit is down and despite there being a decrease overall in trade of 15%, COVID related, the trade deficit is up almost 13% relative to 2016. That is not what Trump promised. And it’s not what he’s saying. So, the data is his own government’s data and it’s equally compelling when it comes to the issue of outsourcing. Trump said he’d get rid of outsourcing. But the reality is, 300,000 plus more jobs have been certified by the department of labor under the Trump administration as having been lost to trade and that is just under one narrow program called Trade Adjustment Assistance. That’s not even the whole count of the loss because that Trade Adjustment Assistance is basically a system where you can get extended unemployment benefits and retraining money but you have to know about it You have to prove your job was lost to trade and so it is by proponents of our current trade rules considered maybe a 1 out of 10 count of the actual loss. 300,000 certified jobs. So, not the end of outsourcing that Trump promised.
Ryan:
We dig into the trade adjustment assistance numbers in a previous episode so folks should go back and give a listen if you want to get deep into that data.
With the deficit Lori, normally the reduction in trade would create a reduction in the deficit but that hasn’t been happening. Is that due to the inept way Trump has handled the pandemic or the lack of a way to deal with a health crisis of this magnitude or are there other things at first in that
Lori:
So, the economic impact of the COVID crisis certainly is related to our hyper globalization system implemented for the past 25 years agreements like the world trade organization and NAFTA where we have really concentrated supply chains so that we are so reliant on imports from just 1 or 2 countries for things we vitally need every day so that when you have people in the country get sick and the factories get sick so when the factories close down or the ports close down or a country like China where a lot of the personal protective equipment we use and medicine is made decide reasonably, the government decides that they the need the stuff for people in their own country, we end up with both huge worse health impacts we can’t get the things to be healthy and safe but also economic impacts in this over integrated hyper globalized economy. So, it is certainly the case that when we saw the fall off in trade it wasn’t a shock we saw that after the global financial crisis. What’s shocking is that when trade falls off 15% the US trade deficit doesn’t follow. And that is in part because of things that happened way before trump this whole hyper globalized regime of NAFTA and WTO, but it also reflects the things he didn’t do in the 3 and a half year plus he has been president. So, there was a lot of talk about how for instance on day one he would hold China accountable for manipulating currency. We are going to have a future podcast on how this currency manipulation business works. The difference is that if a country holds too many dollars it holds up the value it buys dollars in currency markets it holds up the valley of the dollar or if it basically intentionally takes actions to reduce the value of its currency both things mean that effectively you’re subsidizing exports from your country to the US and you’re making it too expensive for things made here to be sold in your country. Well, trump never dealt with that with China. So, the section 301 tariffs have reduced some imports from China but relative to systematic dealing with some of these structural imbalanced causes, he didn’t take action and he also never took action on the thing that you can do to improve demand in the us which is Buy American. He made a lot of executive orders and announcement and got a lot press about improving buy American but they never actually followed through so instead of having billions more of government purchases of us made stuff were still purchasing with our tax dollars basically outsourcing them to purchase stuff made elsewhere despite having a law if it was being enforced properly that Trump could have done that unilaterally without congress that would have reversed. So some of that dynamic is stuff that needed to get fixed that still needs to get fixed that has not gotten fixed.
Ryan:
Let’s talk more broadly about manufacturing and the purchasing managers index (PMI). Our research director asked me to ask about that and I said sure and then I was like I have no idea what that is. So maybe you can tell me and the listener what this is?
Lori:
PMI is basically an indicator of the health of the manufacturing sector in that it basically is forward orders for inputs for an equipment and so you can see it’s an index in a sense that it is looking forward to what activity is happening now that can project what will be happening in a month or two or six or a year after. So people looked at the PMI index so if its 50% or better its basically constant if it’s higher than 50% growth in the sector if it’s lower it contracting in a sector and the reality is that the manufacturing sector started to grow in the last couple of years of the Obama administration and that growth continued into the first two years of the Trump administration and you can see that whether you look at the bureau of labor statistics numbers of manufacturing jobs or if you look at the PMI there’s an upward trajectory over a four year period. So, if you start to look in 2019 well before the COVID crisis in the middle of the year you start to see the job numbers but also the PMI flattened then it actually starts to decline. So, the Trump administration likes to say that they were going gang-busters that they were creating so many manufacturing jobs, that they were doing something miraculous then COVID ruined it. Well, actually they were on the same trajectory as the previous administration for 2 years and then they flattened out, and then COVID happened. So, the notion that somehow the administration is the great champion of manufacturing jobs, it is true that a lot of manufacturing jobs were created in the first two years of the Trump administration just like they were in the last 2 years for the Obama administration but that sadly ended well before the time that the COVID crisis hit and in some states there are not net losses in manufacturing jobs it’s generally fairly flat and because there’s been mass outsourcing still like in Michigan the rate of outsourcing has been related to trade-related job losses has been two times higher fast than it was in the three years previous to trump in some states the numbers are really not good.
Ryan:
These numbers and this data is all fairly depressing and I guess a bit not surprising do you think that Trump is getting away with selling one story and obviously living another?
Lori:
I think that we have the same problem on issue after issue which is people who want to believe trump has fixed a problem don’t want to hear that factual evidence to the contrary and shut it out and people who think Trump is a disaster are happy to season any evidence reinforcing that. And the big question to me practically is in states where manufacturing and trade really affect day to day the communities top to bottom are people’s lived experiences what they’re thinking about. Did those jobs they were promised to happen? Did they stay? Is there still outsourcing? I suggest the big picture data how compelling it is doesn’t actually in most people’s lives have as much impact on what they actually seem. Just a guess. At least what they seem now we have all that data out in front of folks so it’s a pretty compelling and not a great picture
Ryan:
Where can fold find this data?
Lori:
So to make it more accessible we’ve actually taken the trade adjustment assistance database the Department of labor’s database and we have it at tradewatch.org you can go to our trade data center and what we’ve done is made it more accessible because we’ve geomapped is so you can put in your congressional district or your city or your zip code and you can get a list generated of the certified trade-related job loss near you which unfortunately is not a feature of the department of labor’s website or if there is a specific company you want to know what they’ve been up to you can put in a company name and search so that’s act tradewatch.org. as far as this trade data you can also go top tradewatch.org and look at our landing page every month have the new trade data and we basically crunch the numbers so you don’t have to so we do the inflation controlling and we compare it to the previous year to the previous period in the end of Obama administration so we basically do the math so you can see the chase points. So as far as the purchase managers index if you’re really into that you can actually just google PMI and you can see it over time on line but we also talk about the PMI in each of our monthly trade releases which you can once access at tradewatch.org, come one come all, our whole job is to make this information accessible to everyone can see what the actual facts are.
Ryan:
Rethinking trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit Rethinktrade.org as well as tradewatch.org to educate yourself and find out how you can get involved in work we are doing in the fight for fairer and more equitable trade policies.