On Thursday, President Trump flipped his position on the Trans-Pacific Partnership trade agreement, suggesting the U.S. might want to rejoin the pact. His announcement sent Wall Street indices shooting upward in jubilation and angered labor leaders. It left China—which has been sorting out how to respond to Trump’s announced steel and aluminum tariffs—even more bewildered as criticism grows of its “Made in China 2025” initiative to dominate the high-technology sector.
Trump’s about-face is especially striking given that exiting the TPP was a crucial plank in his economic agenda on the campaign trail and one of his first acts as president. That pledge played well to the frustrations of people who know the global economy is ripping them off and are understandably angry. Continue reading →
“Rich people who don’t need it get lavish billion-dollar handouts from this president…The struggling poor, on the other hand, are going to see new work requirements attached to their $1.40-a-meal food stamp.”
Social welfare advocates on Friday denounced a proposal included in a draft of the 2018 Farm Bill which would impose work requirements on most adults who receive benefits from the Supplemental Nutrition Assistance Program (SNAP), commonly called food stamps. The proposal represents the first concrete attempt by Republicans to erode the social safety net since President Donald Trump took office.
Critics said the plan showed blatant hostility toward the 42 million Americans who rely on the program, and that it would do nothing to “break the poverty cycle” as House Agriculture Committee Chairman K. Michael Conaway (R-Texas) claimed on Thursday. Continue reading →
In a statement responding to the news that Trump has directed his top economic adviser Larry Kudlow and Trade Representative Robert Lighthizer to examine options for reentering the 11-nation accord, Lori Wallach of Public Citizen argued that the president’s move “could bring short term joy to Democratic campaign operatives” but would be yet another signal that Trump “cannot be trusted on anything.” Continue reading →
Several women’s advocacy groups marked Equal Pay Day by delivering a petition to the Equal Employment Opportunity Commission to demand the agency collect American employers’ pay data to accurately monitor the nation’s gender wage gap. (Photo: @AAUW/Twitter)
A new report released on Equal Pay Day shows that the gender wage gap has actually worsened for women under 40 in recent years, despite increased media attention on the issue alongside mounting demands that businesses and politicians crack down on workplace sexual harassment, which researchers have tied to pay inequality.
“Despite the great awareness of the gender equity issue, there is evidence that we have lost ground on this important measure of equality,” said John Schwarz, chief executive of Visier, the workforce analytics firm that conducted the study. “These findings should be a wake-up call to business leaders.” Continue reading →
Led by Eric Schneiderman of New York, Attorneys General from 17 states and the District of Columbia have filed suit against the Trump administration for its plans to ask about citizenship on the 2020 census. (Photo: Eric Schneiderman/Twitter)
Attorneys General from 17 states and the District of Columbia are suing the Trump administration for its decision to ask about immigration status on the 2020 census, a move denounced by immigrant rights advocates as an effort to “undercount communities of color.”
Led by Eric Schneiderman of New York, the state attorneys—along with legal representatives from six cities and and the bipartisan U.S. Conference of Mayors—filed suit (pdf) in hopes of requiring the Trump administration “to enforce the federal government’s constitutional obligation to conduct an ‘actual Enumeration’ of the national population every ten years, by determining the ‘whole number of persons in the United States.” Continue reading →
An estimated 30,000 Oklahoma teachers rallied at the State Capitol on Monday, demanding far more funding for education than what was included in the legislature’s last-minute effort to avoid a strike last week. (Photo: @cora/Twitter)
A weeks-long mobilization in Oklahoma resulted in teachers striking across the state on Monday, with tens of thousands of educators and supporters rallying at the State Capitol in Oklahoma City to demand more funding for schools and higher wages for teachers.
Organizers planned to speak with state lawmakers about how decades of funding cuts have affected their schools—and why a bill passed in the legislature last week that would raise taxes on oil and gas production to give teachers a $6,100 raise and allot $50 million for school funding was not enough to stop the protest. Continue reading →
The tariffs are meant to address two problems: intellectual property theft by China and a steep and persistent trade deficit.
As an economist and expert in international trade, I don’t see how the proposed tariffs will resolve either one. In fact, it’s more likely that they will create two new problems by hurting both consumers and businesses.
IP theft and trade deficits
The administration formally justified its tariffs by invoking Section 301 of the Trade Act of 1974, which allows the president to impose tariffs on countries in violation of international trade deals.
Intellectual property theft has been a major complaint of American companies doing business in China for decades. Sometimes this theft occurs through illicit means, such as industrial espionage. It also occurs through legal channels, such as when U.S. companies are forced to form a joint venture with a Chinese business. In other cases, technology transfers are a precondition of doing business in China.
The other problem that has long irked the president is the significant trade deficit. Since the U.S. normalized trade relations with China in 2000, the deficit ballooned from less than $84 billion to over $375 billion in 2017.
This “China shock” of cheap goods has caused considerable disruption in the U.S. economy. The labor market has been surprisingly slow to adjust, leading affected workers to earn far less money over a lifetime.
The wrong solutions
It remains to be seen, however, whether the tariffs will alleviate either problem.
The administration’s calculation seems to be that China will back down on intellectual property theft if faced with less access to U.S. markets.
But China is less dependent on U.S. trade now than it was a decade ago, making its economy resilient to these sorts of punitive measures. The U.S. accounted for 18.4 percent of Chinese exports in 2016, down from 21 percent in 2006.
The U.S. likely would have better luck resolving this problem at the WTO, which China joined in 2001 and must abide by its rulings. The best part about a WTO ruling is that it would affect all of China’s exports, not just those to the U.S.
The U.S. personal savings rate has fallen steadily since the late 1970s. At the same time, the government has run persistently large budget deficits, both of which have increased the level of borrowing in the U.S. economy.
As a result, foreign investment, particularly from China, has become increasingly critical to financing U.S. economic growth. This is great news in terms of helping Americans buy cheap Chinese goods and the government finance its budget deficit. But all that foreign cash going into the financial market isn’t being used to buy the stuff Americans are producing, like Harley Davidson motorcycles and Iowa corn.
This results in lower exports and a higher trade deficit. Tariffs will not change this reality.
Two new problems
While the full details of the tariffs have yet to be released, it’s clear they’ll cause at least two immediate problems.
One is that U.S. consumers will be hurt. The typical consumer has about $260 in extra purchasing power as a result of trade with China. Those benefits, which disproportionately go toward working-class Americans, will fall due to the U.S. tariffs, as American importers will pass some of their increased costs along to consumers.
Particularly vulnerable to Chinese retaliation are the pork and soybean industries, which are concentrated in the Trump-friendly Midwest. This list could grow if a trade war with China escalates.
A broader concern is that, by acting unilaterally, the Trump administration is undermining the broader system that has facilitated the growth of international trade and adjudicated grievances between countries since World War II.
While far from perfect, organizations such as the WTO have limited the scope of trade wars since the chaos of the 1930s. Failing to uphold these institutions could have major consequences in the future.
Taking the stage on the National Mall in Washington, D.C. on Saturday, high school student David Hogg offered hundreds of thousands of audience members a visual representation of his reasons for helping to organize the March for Our Lives, a worldwide gun control advocacy demonstration.
“I’m going to start off by putting this price tag right here as a reminder for you guys to know how much Marco Rubio took for every student’s life in Florida,” Hogg said, placing a price tag reading “$1.05” on the podium. Continue reading →