With two trade deals finalized in two days, President Trump is set to campaign for reelection as having done what skeptics said was impossible: rewrite the rules of trade policy.
To workers in the Rust Belt and rural areas that feel left behind in the current economy, he’ll make the case that he delivered on his 2016 promises to fight for them.
“Our negotiations were tough, honest, open, and respectful, leading us to this really incredible breakthrough,” Trump said during Wednesday’s signing ceremony for the ‘phase one‘ deal with China. “Most people thought this could never happen. It should have happened 25 years ago, by the way. But that’s OK.”
White House officials have argued that Trump has demolished the previous consensus among economists and policy experts that tariffs are bad economics and that trade fights are bad politics. They argue that, by rejecting that line of thinking, Trump won the United States-Mexico-Canada Agreement on trade and the phase one deal with Beijing.
Whether the voters won is less clear. The economic benefit of USMCA is modest. The International Trade Commission, a federal agency, found that the USMCA would raise the U.S. gross domestic product by $68 billion, or about 0.35%, and add 176,000 jobs nationwide, an increase of 0.12% in employment. The China deal will require close monitoring to ensure Beijing abides by it.
The wins came at a price, too. Markets suffered due to the economic uncertainty caused by the trade fights. China retaliated by curtailing purchases of U.S. farm goods. The move was calculated to hurt pro-Trump, rural areas and forced the administration to extend billions in aid to farmers.
China bought $19.5 billion in U.S. farm goods in 2017. That dropped to $9.1 billion in 2018 and $8.6 billion in 2019. To make up for that, the phase one deal includes a $40 billion to $50 billion purchase of U.S. farm goods, though it is unclear if there is even that much spare U.S. product to buy.
Peter Navarro, the president’s top trade policy adviser, argued in a Wall Street Journal op-ed on Monday that Trump’s critics predicted far worse would come out of the trade fights and that this exposed the flaws in traditional economic models. “Americans should welcome this analysis warmly — especially in the heartland, where the ugly predictions of the anti-tariff forecasters seem so out of touch with the beautiful realities of the Trump economy,” he wrote.
Trade is one issue that even the president’s critics will concede he has been consistent on. He has long viewed trade deficits with other countries as proof that the U.S. is losing out, a view most economists reject. Trump made confronting China one of his main planks in the 2016 campaign. He called for tariffs on Chinese goods as high as 45%. The current top rate is 25%.
“It doesn’t have to be 45%. It could be less. But it has to be something, because our country and our trade and our deals and, most importantly, our jobs are going to hell,” he said in a GOP presidential debate.
“Critics said it couldn’t be done, but he made it happen,” House Minority Leader Kevin McCarthy, a California Republican, said last month when the House approved USMCA.
Polls have shown little damage to Trump in rural areas due to the China trade fight, but not much benefit, either. Most simply wanted the fight resolved.
In Rust Belt states suxh as Ohio, USMCA has won bipartisan, if grudging praise. “This trade agreement, for the first time ever, put workers at the center of the agreement,” said Ohio Sen. Sherrod Brown, a Democrat, during the vote on Thursday.
Trump has often said that his policies should have been in place decades ago. “My trade deals aren’t causing a problem. This is something that had to be done. The only difference is I’m doing it,” he said last August.
Business groups counter that the conventional wisdom remains correct: The trade wars are disruptive and need to be avoided. They argue that importers have blunted the negative effects of the trade wars so far by absorbing the costs through lower profits, relying on pre-tariff inventories and shifting supply chains. Eventually, consumers will take a hit.
“We need to tear down barriers to trade and limit the use of tariffs,” Chamber of Commerce CEO Tom Donohue said last week. “Let’s not forget, American businesses and consumers pay the tariffs.”
