Spotlight: Trump’s Misplaced Protectionist Promises

Donald Trump depended on spectacle far more than he did practical policy promises on the Presidential campaign trail. However, one of the few subjects where Trump took strong and uncompromising positions was in trade policy. If elected, according to Trump’s platform, his administration would be devoted to reversing the free-trade policies which had ballooned the trade deficit, and enabled companies to export American jobs overseas. Implementing measures to incentivize the return of jobs from abroad, and punishing companies looking to move jobs in the future would level the economic playing field for a generation of workers that had been at the mercy of Washington’s elite. But in spite of Trump’s emphatic assertions, few experts are in agreement that a shift towards ‘fair trade’ will help working class Americans.

In his article for Foreign Affairs, trade economist Douglas Irwin argues against Trump’s protectionism, cautioning that the President “…should take care to distinguish between what trade policy can achieve and what it cannot…” lest irreparable damage be done to the world trading system, and the voters who elected him.

Contradicting the increasingly common narrative that trade is responsible for the decline of American manufacturing, Irwin makes the case that restricting trade through protectionism has not worked in the past to stimulate manufacturing, and would work even less effectively in today’s world. Reagan-era protectionism began with a similar public uproar over the effects of foreign trade despite the fact that appreciation of the United States dollar and a lack of industry innovation were the more damaging factors. Protectionist measures such as raising barriers to steel imports did little to help American workers (and actually hurt them as cheap Japanese cars became more expensive), and steel-consuming industries were forced to raise prices to offset the increased cost of importing materials. Irwin argues that in the current day – to an even greater extent than in the 1980s – protectionist restrictions on imports would hurt downstream industries, encourage other countries to implement similar restrictions, and ultimately raise the cost of goods for American consumers without uniformly benefitting American industry.

Another theme of the election and now a common Trump administration refrain has been its desire to reduce the trade deficit with countries such as China and Mexico. Irwin notes that the trade deficit has not substantially increased since the 1980s, and that measures to address the deficit through import restrictions will be unhelpful in a world where US exports are tied to materials imported as global supply chains have come to dominate manufacturing.

Irwin does highlight some strategies that the Trump administration could use to achieve trade policy objectives effectively. Threatening protectionist policies with key trading partners often does a better job of fostering prosperity through reducing trade barriers than actually implementing protectionist policies. Similarly, border adjustment taxes which shift the tax burden from goods produced in the U.S. to goods consumed in the U.S. would do a better job targeting the imports that Trump wants to reduce, and in a way that won’t leave consumers paying the entire bill
More than anything, Douglas Irwin wants Donald Trump to come to the realization that trade is not a zero-sum game. Trump must find realistic ways to improve the economy, rather than blindly dismantling the global free trade system his predecessors painstakingly constructed over many decades.

Irwin, Douglas. “The False Promise of Protectionism.” Foreignaffairs.com. Foreign Affairs, 17 Apr. 2017. Web. 17 Apr 2017.

 
 

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