Home News Trump promised to win on trade, but instead faces a record-high deficit

Trump promised to win on trade, but instead faces a record-high deficit

He’s clearly taken care of the first part by upending a number of trade relationships the United States has around the world. But so far, there’s been relatively little progress toward his goal of revitalizing struggling American industries and cutting US dependence on the rest of the world’s products.

“The administration made it seem like a quick tweak in some trade agreements would bring back the manufacturing workforce, but the problems have to do with technological change,” said Phil Levy, a senior fellow at the Chicago Council on Global Affairs who served as a senior economist for trade under President George W. Bush. “That’s an impossible thing to fix with aggressive trade policy.”

The President promised as a candidate and since taking office that he would use his deal-making skills to extract better deals from other nations, including allies.

The latest target is India, which learned on Monday that the Trump administration is taking steps to end a special tariff agreement after a round of talks in late February.
One of Trump’s first moves was to pull out of the new 11-country Trans-Pacific Partnership. He then renegotiated the North American Free Trade Agreement with Canada and Mexico.

He’s also put tariffs on Chinese goods as a way to get Beijing to the table to negotiate a new trade deal, and is considering new tariffs on autos as his administration pursues a separate deal with the European Union. Foreign steel and aluminum have also received tariffs as a way to protect US industries from unfair trade practices.

But so far, the results have largely been invisible to American workers and consumers.

Tariffs on steel, for example, have bolstered the US industry, which saw an increase in demand and prices for its products last year. But the rebound hasn’t translated into a huge new demand for steelworkers. While some mills have reopened and more than 2,000 jobs were created last year, employment in the industry is still down about 43% since 1990.

And the jobs being created on the producer side are coming at the expense of industries that buy steel, like nail and farm equipment manufacturers. Tariffs have made foreign steel more expensive, and allowed US companies to raise prices.

That holds true for US importers that buy Chinese goods from abroad, like luggage, hats and semiconductors, that have been hit by tariffs. While Trump has often suggested that the tariffs have forced China to pay billions of dollars to the United States, it’s actually US businesses that pay the tariffs on foreign goods.
Import tariffs cost American consumers and businesses $3 billion a month at the end of 2018, according to a paper released this week by the Center for Economic Policy Research.

Plus, foreign countries have retaliated to Trump’s tariffs by putting taxes on US goods. They’ve hurt manufacturers and farmers that rely on big exports markets, like soybean growers.

The clearest effect of Trump’s trade moves is the economic slowdown in China. That in turn, hurts US companies like Apple, which has warned investors to expect lower iPhone sales in China this year.
China cuts taxes as it warns of 'a hard struggle' ahead

The Trump administration has finalized just one new trade agreement to date. Economists say a new deal with South Korea made improvements, but did not drastically move the needle. It raised the quota on US autos shipped to South Korea, but automakers didn’t come near reaching the cap during the previous year.

Congress has yet to consider the new NAFTA, known as the United States-Mexico-Canada Agreement. The deal has also been criticized for making few structural changes. While it would open up the Canadian dairy market to more US farmers, free-trade advocates like Republican Sen. Pat Toomey claim a new rule on autos would restrict trade. The rule requires more of a vehicle’s parts to be made in North America in order to remain tariff-free.

The new NAFTA adds an entire new chapter on digital trade. Analysts say the update was needed, but the section is similar to what was included in the Trans-Pacific Partnership. When the United States pulled out of that agreement, Mexico and Canada still signed on.

Lawmakers on both sides of the aisle have opposed the steel and aluminum tariffs, which were imposed on allies including Canada and Mexico. Trump imposed the them under a trade power that allows him to put tariffs on goods that threaten national security.

But a bipartisan group of lawmakers led by Toomey are pushing for a bill to require congressional approval for past and future national security trade restrictions.

CNN’s Haley Byrd contributed to this report.

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