The chaos of Donald Trump’s intentional trade war aside, the central question is whether the objective the president is trying to achieve is even obtainable.
Can the United States, by imposing widespread tariffs on imported goods and taking other protectionist measures, turn the clock back and revive domestic manufacturing in this country to the position it enjoyed a half-century or more ago?
Conservative voices, including The Wall Street Journal, are highly skeptical.
In the 1950s, the Journal recently reported, around 35% of private-sector jobs in the U.S. were in manufacturing. Today it’s less than 10%.
Unfair trade practices, the main culprit in Trump’s economic world view, are only part of the reason for that dramatic swing, and probably a small part at that.
Rather, as Americans became more affluent, they spent a greater percentage of their income on services, such as travel, restaurants and medical care, and a lower percentage on goods made in this country or anywhere else. Thus, service jobs rose as manufacturing ones slid.
At the same time, production got more efficient with automation, requiring fewer people to manufacture products. Also, companies — in order to keep their costs down and stay competitive on pricing — went in search of cheaper labor. Initially, much of this labor shifted to states in the South, including Mississippi, where an agriculture-dominated economy had kept wages comparatively low compared to the older industrialized parts of the United States. But much cheaper labor could be found in Latin America and Asia, and manufacturing gravitated there — all to the benefit of not just those developing countries but also U.S. consumers, who saw their standard of living rise as nondurable goods required a smaller share of their income.
Russ Latino of the online news site Magnolia Tribune cogently summarized the trade-off in a recent column: “When we import things from overseas we cannot make here, it increases the options available to American consumers. When Americans buy products cheaper than we can afford to make them, that means Americans can spend their time and resources on higher pursuits. Both of these things increase, not decrease the standard of living — allowing us to have more for less.”
U.S. consumers might not be the only ones to suffer in this quest to reclaim America’s industrial heyday. Farmers, who are already in the midst of a down cycle, are worried about losing further market share in China, which is retaliating against the steep U.S. tariffs with countermeasures of their own, especially targeting agricultural imports from the U.S. During the first Trump administration, soybean growers, for example, saw China, their biggest foreign customer, reduce its purchases from a third of all U.S. production to a fourth as a result of tariffs. China found other suppliers, notably in Brazil, to permanently fill the gap. A similar retraction, if not worse, could be in the offing for U.S. farmers, creating an oversupply of U.S. grains and further depressing the price for what they grow.
The trade war could even be counterproductive for the very segment of the economy that Trump is wanting to boost: manufacturing.
The Washington Post reports that, at least in the early stages of this trade war, some U.S. manufacturers are worse off than before it began. The tariffs are boosting the cost of the components they import for the products they make. They are also seeing orders canceled by international buyers, who are concerned about a possible global recession and its dampening impact on consumer demand. These buyers also are uncertain about what the products will cost once the wildly fluctuating tariffs imposed by the Trump administration level off, or if they will level off.
In the short term, the Trump tariffs have been a fiasco. The president is asking for patience, saying any recent downturns in investments or in business are the temporary pain of reshaping the American economy so that this country produces more of what its citizens consume. But if that objective is highly unrealistic or highly inflationary, patience would not be a virtue.
