“From this day forward, a new vision will govern our land. From this day forward, it’s going to be only America first. America first. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families,” former President Donald J. Trump stated in his inaugural address. A large part of President Trump’s America First agenda was directed at trade policy and the need to both strengthen and reshore manufacturing. During the month of October, the nation celebrates Manufacturing Day, and the nation needs to continue to focus on the importance of manufacturing (and mining), not only for a strong economy and national security, but also for a healthy and stable middle-class.
President Trump shocked both political parties with his America First approach to trade policy. He openly embraced the use of tariffs, encouraged “Buy American,” and often commented that the United States was not only at the losing end of trade deals, but often being taken advantage of as a result. The president often pointed out how other nations were placing their national
interests first, while the United States was more committed to following the ideology of free trade and globalism.
President Trump renegotiated trade agreements such the North America Free Trade Agreement (NAFTA), which resulted in the United States, Mexico and Canada Agreement (USMCA), and he placed tariffs on steel and aluminum. President Trump’s steel tariffs helped save and revitalize the steel industry. In addition, he was the first president to fully take on China.
Manufacturing has always been vital to the nation’s economy. It was the “Arsenal of Democracy” that led to the defeat of Nazis Germany and the Empire of Japan during World War II. It was America’s manufacturing strength that helped make the 20th Century the “American Century.” Likewise, it was manufacturing that helped create a strong middle-class. However, this started to change in the aftermath of World War II as the nation embraced globalization and free-trade agreements.
Globalization became a religion for both political parties as many worshiped at the golden alter of free markets and free trade.
As a result of globalization and numerous free-trade agreements, as well as granting China most favored nation status, the United States began to see a sharp decline in manufacturing, especially in the industrial Midwest. Ambassador Robert Lighthizer, who served as President Trump’s United States Trade Representative (USTR), argues that “trade accords during this time, such as the NAFTA, zeroed out tariffs on imports from low-wage countries, worsening manufacturing job losses.”
This impacted communities across the nation, especially in the Midwest. Ambassador Lighthizer noted that the United States lost 5 million manufacturing jobs. “That, in turn, devastated towns and contributed to the breakdown of families, an opioid epidemic and despair,” Ambassador Lighthizer wrote. The “blue-collar” workers became the “forgotten men” and often they were told by the political elite that they should either abandon their communities and relocate or learn another skill such as computer programming. Since 2001, the nation “has rung up over $12 trillion in accumulated global deficits.”
This “creative destruction” had consequences.
Consumers were able to get cheaper products, but the loss of manufacturing jobs led to lower wages, greater dependence on social welfare programs, and the economic decline of many communities. It is estimated that 3.7 million American jobs alone were lost to China between 2001 and 2018.
“For many decades, we’ve enriched foreign industry at the expense of American industry … One by one, the factories shuttered and left our shores, with not even a thought about the millions and millions of American workers that were left behind. The wealth of our middle class has been ripped from their homes and then redistributed all across the world,” President Trump noted.
The COVID-19 pandemic demonstrates just how dependent the nation has become not just on China, but also other nations for necessities such as medicines and medical supplies. The pandemic has also led to many supply-chain issues. The United States has become dangerously dependent on foreign nations, even potentially hostile nations such as China, for essential goods. This even includes materials related to our national security and defense. Currently, a shortage of semiconductors exists.
“Why are semiconductors so important?
Because computer chips are the 'brains' of not just computers, cars, and medical devices, but also the weapons systems that support America’s military. Being so dependent on imported computer chips leaves America’s national security vulnerable to the whims of the global market,” wrote Michael Stumo, CEO of the Coalition for a Prosperous America.
“Is not the case now conclusive that we made a historic mistake when we outsourced our economic independence to rely for vital necessities upon nations that have never had America’s best interests at heart,” asked columnist Patrick J. Buchanan?
Currently, the United States is still running large trade deficits and President Joe Biden is getting pressure to reverse some of President Trump’s trade policies, especially tariffs. As of now the Biden Administration appears to be leaving tariffs on China as well as keeping the steel and aluminum tariffs. Nevertheless, pressure is building within both political parties to not only end tariffs, but also join the Trans-Pacific Partnership agreement, which President Trump stopped the nation from joining.
Critics of President Trump’s trade policy argue that it not only punishes America, but that he started a trade war. Supporters of globalization and free-trade fail to realize that China and other nations were already taking advantage of the United States. Whether it is currency manipulation, flooding markets with cheap products, or their system of state subsidized industry, China has taken advantage of the United States. In addition, China is actively pursuing power politics by rattling sabers and building up their military. China is working to be the dominant power.
“International trade has largely failed America over the past three decades,” Ambassador Lighthizer wrote in The Economist. Historically, the Republican Party, with its roots from Alexander Hamilton, saw tariffs as a policy tool to defend America’s home-market and protect workers. President Trump is right on trade, and it will take time to rebalance trade, but in the end, it will strengthen our economy and create a stronger middle-class.
John Hendrickson is Policy Director of Tax Education Foundation of Iowa.