President Donald Trump is very keen to talk trade to distract from his impeachment trial. Central to his victory in key Midwest swing states were his pledges to stop job outsourcing, rebuild American manufacturing and end the job-killing trade deficit. He’s off to Michigan and Iowa after yesterday’s signing ceremony for the new North American Free Trade Agreement (NAFTA) and last week’s preliminary China trade deal. But his impeachment-distraction trade mission is complicated by some inconvenient facts:
- Tens of thousands more U.S. jobs have been government-certified as lost to outsourcing during the Trump era. This includes outsourcing by General Motors, Boeing, Honeywell, Siemens, IBM, Hewlett Packard, United Technologies, Caterpillar, Electrolux, General Electric, Harley-Davidson, Honeywell, Kohler and Intel Thompson Reuters, AT&T, Dun & Bradstreet, Verizon and Ministry Health. Verizon, Ford and Nabisco also have outsourced under Trump, but have not yet been processed on the certified list.
- Manufacturing sector job growth hit a wall in 2019, as the sector slid into recession. Manufacturing job creation nearly stopped after a job growth boom that started two years before Trump was elected, while an important indicator of manufacturing sector health – the Purchasing Managers Index – registered its lowest reading since the June 2009 financial crisis days. The U.S. manufacturing sector has been in a technical recession for the past two quarters.
- The overall U.S. trade deficit increased 14% in Trump’s first two years. Despite expectations that the 2019 deficit will be smaller, the manufacturing sector deficit will be up again, while the overall decline reflects a jump in U.S. exports of oil and gas and lower oil imports. During the Trump administration, the NAFTA trade deficit has grown 30% relative to the year before Trump took office.
- The new NAFTA will not bring back hundreds of thousands of jobs, as Trump nonsensically claims. Nothing makes this clearer than recent developments in the U.S. auto sector. Post-NAFTA renegotiation, U.S. auto companies have announced plans to expand production in Mexico. GM is closing numerous U.S. plants while making popular models in Mexico. Ford is even making its new Mustang electric SUV in Mexico – the first Mustang not to be made here. Over time, the labor standards and enhanced enforcement terms Democrats forced into the new NAFTA may help raise wages in Mexico, and this also may reduce U.S. corporations’ incentives to outsource more U.S. jobs to Mexico to pay workers less.
- Contrary to his campaign promises, Trump has rewarded firms that have outsourced jobs with lucrative government contracts. Sadly there are many instances, but consider a state on today’s trip: In December 2018, the Siemens plant in Burlington, Iowa, closed after 148 years of operation. The plant closure eliminated 107 jobs, as part of a nationwide loss to outsourcing of 1,800 jobs by Siemens. During 2019, contracts for $877,354,618 were granted to Siemens.
|Firms That Have Caused TAA-Certified Job Losses in Iowa||Value of Federal Contracts Received in Last 12 Months|
|United Parcel Service (UPS)||$637,292,359|
|Delta Air Lines||$141,014,806|
- Trump’s tax bill promotes more outsourcing. If a firm shuts production in the United States and moves to Mexico, their U.S. federal tax rate is cut in half. (A firm in the U.S. would pay a 21% corporate tax rate, while offshore income is taxed at a 10.5% rate.)
- On the China front, it remains to be seen if what the White House is selling as a “phase 1” China trade agreement will translate into changes in trade flows or China policies, and the promise of one-time increased Chinese purchases of U.S. goods, including agricultural exports, that the administration is touting may provide elusive.
- Chinese purchasing agency commodity orders in early January did not reflect a shift to U.S. purchases, while Chinese officials have said they will not increase agricultural import quotas.
- The China agreement does not cover the mass subsidies or other “China 2025” policies that the White House has spotlighted as a threat to U.S. manufacturing and geopolitical interests. Indeed, policy changes China has made that are reflected in the agreement, including more access for foreign investors and protections for their intellectual property, may promote more outsourcing of U.S. investment and jobs.
- The government has certified tens of thousands of Michigan workers as trade job-loss victims under just one narrow program called Trade Adjustment Assistance (TAA). This government program represents a significant undercount: Workers must know to apply and meet the TAA’s narrow criteria, which exclude many types of jobs lost to trade. The top five firms that the TAA certified for China job loss in Michigan are Yale Lift-Technologies, Lear Corporation, Chrysler, Ameriwood Industries, and A123 Systems LLC. The top five firms certified for NAFTA job loss in Michigan are Tyco Electronics, Lear Corporation, Copper Range Co., Collins and Aikman and Kraft Foods. As well, Chrysler, Ford and General Motors all have extensive Michigan TAA certifications for production relocation that do not specify to what country the work has been relocated.
- The government has certified tens of thousands of Iowa workers as trade job-loss victims under TAA. The top five firms that the TAA certified for China job loss in Iowa are Maytag, Ocwen Loan Servicing, TMK-IPSCO, Lands’ End, and IMI Cornelius. The top five firms certified for NAFTA job loss in Iowa are Eaton Corporation, John Deere, GFSI, Intier Automotive Seating of America and International Automotive Components.
Data Notes: Deficit figures are adjusted for inflation to the base month of December 2019. Thus, the figures represent changes in trade balances expressed in constant dollars. So, for months prior to December 2019, the numbers are different than the data unadjusted for inflation that is provided by the U.S. Census Bureau. The U.S. Department of Labor certifies trade-impacted workplaces under its TAA program. This program provides a list of trade-related job losses and job retraining and extended unemployment benefits to workers who lose jobs to trade. The TAA is a narrow program, covering only a subset of workers who lose jobs to trade. It does not provide a comprehensive list of facilities or jobs that have been offshored or lost to import competition. Although the TAA data represent a significant undercount of trade-related job losses, the TAA is the only government program that provides information about job losses officially certified by the U.S. government to be trade-related. Public Citizen provides an easily searchable version of the TAA database. Please review our guide on how to interpret the data here and the technical documentation here. The federal contract data is sourced from usaspending.gov.
For more information visit State-by-State Outcomes of NAFTA.