Did Trump Win the Trade War with China? The Data Says No
Trump blamed bad trade deals for the loss of American jobs, so he waged a trade war with China. It didn’t go well.
One of the reasons for Trump’s appeal is that he promised to bring jobs back. He painted a picture of politicians and corporations selling out the American worker to line their own pockets by inking harmful trade deals, namely with China, the European Union, Canada, and Mexico. He positioned himself as the only one tough enough to renegotiate and put “America First.” So in 2018 he made good on his campaign promises and launched his trade wars with little input from economists because he believed “trade wars are good and easy to win.”
He said at the beginning of the 2019 G7 conference that “we had horrible trade deals and I’m straightening them out. The biggest one by far is China” and that those in power have been “taking hundreds of billions of dollars out every year and putting it into China.” For many voters, he was seen as the white knight ready and able to correct the sins of the past and put Americans back to work.
Now that the smoke has cleared and he’s been confined to a small corner of the internet, was he right? Did his trade wars work as intended?
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The War with China
In January 2018, Trump accused China of “unfair trade practices” and stealing intellectual property, which have some elements of truth to it, and Trump used these as justification for imposing tariffs on solar panels and washing machines. Trump was confident that he had the upper hand and that China “would not retaliate.” And initially China didn’t return fire, so in March Trump continued by imposing tariffs on Chinese steel and aluminum imports. Shortly he added some 1,300 categories of Chinese products, worth an estimated $60 billion, to the tariffs list.
The idea behind all of this was that tariffs would make imported products more expensive, and US consumers would gravitate towards cheaper, locally made products, thus shrinking the trade deficit with China. In essence, this is true, but like with a lot of what Trump did and said, there were unintended (yet completely predictable) consequences.
In April, China responded by placing tariffs on 128 US products. Among the hardest hit was soybeans, which accounts for 25% of US agricultural exports. The Chinese ambassador claimed that the Trump administration had given them “no alternative but to fight back.” The next day, they added another 106 products to the list, including the major US exports of airplanes and cars. After Trump threatened tariffs on another $100 billion worth of products, the Chinese just stopped buying US soybeans, a major blow to farmers.
The US and China continued to trade blows throughout the rest of Trump’s tenure, even dragging in outside parties like the World Trade Organization and the International Monetary Fund. Now that Trump is out of office and not able to spread his version of events, let’s look at the official data.
The Official Data
One of the main points of Trump’s trade war was to reduce the trade deficit with China. As can been seen in the data, the trade deficit peaked going into 2018 and then slightly improved. By 2020, it had returned to more or less the same level as before, a far cry from what was supposed to happen. Mary Lovely, a senior fellow of the Peterson Institute for International Economics, explained that “The Trump administration never had a feasible plan for reducing the trade deficit.” She claimed that simply imposing such drastic tariffs on imported goods would lead to retaliation, causing both countries to suffer. She continued by explained that Trump’s tax overall, which largely benefitted the wealthy, ensured that the country “would continue to spend more than it produced.” And the numbers don’t lie:
- US Trade Deficit With China (data from census.gov)
- 2011: -295,249.7
- 2012: -315,102.5
- 2013: -318,683.8
- 2014: -344,817.7
- 2015: -367,328.3
- 2016: -346,825.2
- 2017: -375,167.9
- 2018: -418,232.9
- 2019: -344,312.0
- 2020: -310,263.5
Therefore, Trump’s trade war with China had no significant effect on the trade deficit, due largely to retaliatory tariffs.
Another main point of the the trade war with China is that tariffs would lead to more people buying US goods because they’d be cheaper, thus creating a hiring boom. But, yet again, this isn’t what happened. According to data from the St. Louis Federal Reserve, US manufacturing jobs continually trickled up since 2011, with little difference in 2018 and beyond. In fact, a study from the U.S.-China Business Council found that “The trade war with China hurt the US economy and failed to achieve major policy goals outlined by the Trump administration. Rather than benefiting the economy, it has reduced US economic growth and employment, resulting in an estimated peak loss of 245,000 jobs.”
- US Manufacturing Jobs in January (data from fred.stlouisfed.org)
- 2011: 11621
- 2012: 11838
- 2013: 11983
- 2014: 12081
- 2015: 12292
- 2016: 12383
- 2017: 12367
- 2018: 12559
- 2019: 12828
- 2020: 12792
So the trade war with China didn’t bring jobs back to American soil, as Trump promised. If anything, it put more Americans out of work, as many economists predicted it would, although Trump refused to listen.
As already mentioned, one major unintended consequence was China reducing the purchase amount of soybeans and agriculture products. The official data from census.gov shows a significant dip in 2018 and 2019 for soy, wheat, and corn, leaving US farmers in the lurch. In fact, Trump’s recklessness hurt farmers so bad that he needed to allocate billions to bailing them out. “The Trump Administration implemented the Market Facilitation Program (MFP) in 2018 and 2019 to assist farmers impacted by the trade war. In total, the administration authorized $28 billion of aid to farmers hurt by the tariffs, and is expected to distribute about $23 billion of these $28 billion.”
- Soybean/ Wheat/ Corn exports to China (data from census.gov)
- 2011: 10,508,369/ 160,240/ 871,739
- 2012: 14,879,547/ 213,563/ 1,340,233
- 2013: 13,304,176/ 1,283,564/ 1,014,931
- 2014: 14,485,397/ 194,508/ 135,860
- 2015: 10,494,079/ 161,042/ 218,750
- 2016: 14,212,335/ 205,813/ 51,142
- 2017: 12,230,585/ 352,171/ 152,464
- 2018: 3,129,041/ 106,946/ 59,593
- 2019: 8,008,113/ 56,377/ 57,378
- 2020: 14,078,908/ 571,095/ 1,225,625
Now that the trade war has relaxed, agriculture exports to China have returned to normal. So what was the point? What did the trade war with China accomplish? It seems the only real effect was a temporary hardship for farmers, followed by federal relief funded by taxpayers.
And the story gets even more depressing. A study from Moody’s Analytics found that Trump’s tariffs on China reduced global GDP by 0.3%. They said “real global GDP contracts by 0.3% from peak to trough, with deep recessions in the U.S., Europe, and most emerging markets. Growth in China slows substantially and falls just short of recession.” Different studies found US GDP declined 0.7%. Furthermore, research from Columbia University and the New York Federal Reserve shows that Trump’s actions “depressed equity prices by 6 percent, translating into a $1.7 trillion loss in market capitalization for the firms in our sample.”
Why? Because the cost of the tariffs was not borne by the Chinese, just as Mexico didn’t pay for Trump’s wall. “We have found that in most sectors, these U.S. tariffs have been completely passed on to U.S. firms and consumers.” It’s almost as if Trump didn’t understand what he was doing, trying to act tough, and selling out the American worker to stroke his ego.
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