Trump’s tariff proposal would gut US export jobs
Donald Trump has told the nation what his international trade policies would look like. Unfortunately, the policies — or anything close to them — would result in a negative shock to the US economy. The overall result would be major job losses and lower incomes for most Americans.
At the heart of the presumptive Republican nominee’s proposals is the repeated threat to impose a 45 percent tariff on imports from China. Trump proposes what is effectively a high tax rate on all Chinese imports into the United States. (Trump has also proposed a 35 percent tariff on Mexican imports to pay for a wall.) This kind of confrontational tactic is a recipe for disaster.
The key point is that we sell to — as well as buy from — China. If we were to impose a large tariff or otherwise cut off trade, what would China (or any country) do? They would respond with a similar tariff or other restriction on our exports to them — affecting a wide range of sectors, including agriculture, autos, and high tech.
According to the International Trade Administration, exports of goods and services directly support around 11.5 million jobs in the United States. The latest data are averages for 2015; total nonfarm employment at the end of that year was just over 143 million. Trade is a significant part of the economy — and the employment effects are two or three times larger if indirect effects are included, such as the jobs and incomes of people who provide local services (e.g., restaurants where export sector workers eat, and so on).
Almost everywhere in the United States is connected to exports, one way or another. Detailed data are available by state for goods exports (but not for services) — showing more than 2.6 million jobs supported in the South, 1.6 million jobs in the Midwest, 1.5 million jobs in the West, and 880,000 jobs in the Northeast (all figures are for 2015).
Some of the states with relatively high shares of jobs supported by exports are presumed to be voting Democratic in November — including California (where 11 percent of all jobs are in exports), Washington (6 percent), Illinois (5 percent), and New York (5 percent). But other export-intensive states include Texas, the most export-dependent state (16 percent of jobs there depend on the export of goods).
And a number of obvious potential battleground states for November have a high share of jobs in export industries, including Florida (4 percent) and Ohio (4 percent). It is also hard to imagine that the tourism-based part of the Nevada economy would do well during a trade war with China.
One recent suggestion from Republican strategists is that Trump should focus more of his attention on Michigan, Pennsylvania, Iowa, Missouri, and Wisconsin — with the reasoning being that blue collar, middle-income households may find his messages appealing. But Michigan and Pennsylvania have a relatively high share of jobs supported by goods exports (4 percent and 3 percent, respectively). In Iowa, more than 100,000 people work in the export sector; the number is similar in Wisconsin and only slightly smaller in Missouri. In any finely balanced electoral situation, proposing to immediately reduce our exports is hardly likely to win support.
China is our single most important trading partner — measured in terms of jobs supported by goods exports. By state, Washington exports the most to China, followed by California and Texas. Nationwide the Department of Commerce estimates 678,000 people work directly producing goods sold to China — this is 10 percent of all US jobs supported by exports. And jobs resulting from goods exports to China have grown rapidly — over 200,000 new jobs from 2009 to 2014.
The data on services suggest a similar pattern — China is our fourth largest export destination, again measured in terms of jobs supported (273,000 jobs in 2014). And jobs in service exports to China grew more in absolute terms from 2009 through 2014 (by 143,000 jobs) than jobs involved in exporting services to any other country.
Taking the goods and services numbers together, exports to China in 2014 supported nearly 1 million jobs directly — and at least that many jobs again in terms of indirect effects.
The available data are not perfect and do not pick up all the ways in which components are assembled or corporate teams work across state borders in the US.
To think about the potential impact of Trump’s policies, just ask your friends what would happen if China (and Mexico, and perhaps some other places) stopped buying their products. A trade war would hurt millions of Americans.
Simon Johnson, a former chief economist of the International Monetary Fund, is a professor at MIT Sloan, a senior fellow at the Peterson Institute for International Economics, and coauthor of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.