President Trump’s huge blunder on tariffs gives us an opportunity to discuss the larger economic issues involved. How do we create good paying jobs in the United States? Or even bigger, how do we offer opportunity to people? Last time we checked, Truck driving was the best job for Black people without a high school education.
Sure, we can talk about tariffs and trade, but Trump has the right idea and the wrong approach. Let’s talk about the real issue. How can we use trade to benefit Americans? And how do we help people who lose jobs to foreign trade? It is a rare chance to change the topic to something that really matters: good quality jobs. We want to look at a trade policy that helps everyone, not just corporations and consumers.
Trade has delivered an abundance of consumer goods and choices. It has provided remarkable value for the US consumer. It has helped keep inflation in check for decades along with immigration. And it has delivered large corporate profits for some America’s biggest corporations. But there has also been a huge adjustment cost. It has devastated the manufacturing sector and driven down wages in the auto industry. It has also helped destroy unions. Trade helped hollow out the middle class especially in manufacturing and in mid-western cities. And helped hollow out the Black middle class.
We have long advocated for fairer, more strategic trade. Trade should be part of a larger industrial policy. Trade should be used to support broader US interests. We should consider the effect of trade on jobs and opportunity. We should help all citizens to benefit by ensuring good-paying jobs for middle-class and lower-class Americans. Our current trade policy has failed to do that.
Note: When we discuss good jobs, we generally mean jobs that pay about $25.00 dollars an hour (about $50,000 a year in 2025), a 40-hour work week, a fixed schedule, health and retirement benefits and sick leave and vacations. We are not considering training or a career path.
Current Trade Policy
U.S. trade policy rests on free-market principles and the theory of comparative advantage: each country specializes in what it does best. But the real world intrudes. When you trade with countries with low-cost labor, your labor income falls. And if you trade too much, wages for workers stagnate for decades.
The US has benefitted enormously from trade. Foreign trade employs an estimate 10 million people. The US exports $3 Trillion in goods and services and the US imports about $4.2 Trillion in goods and services. So the trade deficit is $1.2 Trillion. The US exports food, energy, services, aircraft, chemicals and machinery. We import energy, chemicals, machinery, clothing and manufactured goods.
US has an annual trade deficit of $1.2 trillion dollars. About 7-8% of GDP. But deficit in goods improves living standards and keeps inflation in check. The trade deficit also means those countries can buy US products and invest in the US. US trade has raised the standard of living around the world. There are 9 billion people on earth and 9 billion active cellphones.
Trade has a Downside
But foreign trade has also led to high unemployment, devastated cities and reduced opportunity for millions. Lower prices mean everyone has a car, a phone, a flat-screen TV, and food to eat.
However, low-paying jobs limit upward mobility and a better future. Foreign trade without limits can ultimately limit the ability to buy a home or retire comfortably.
There are two other downsides. Outsourcing also cost us something less visible: technical knowledge and skills. We have de-skilled the economy. We lost engineering know-how and capacity across many manufacturing-related industries.
We have lost the opportunity for a better future for many lower educated individuals. They must now compete against global competition. The US has one of the skimpiest social safety nets thanks to the legacy of racism and discrimination.
Trump is Right on Tariffs
Trump is right, it is time for a reset on trade. But that reset must occur within the greater context of an American Industrial Policy; a policy with the goal of helping American workers. We also appreciate his broad-based approach, which touches every major trading partner. We understand his “shock-and-awe” strategy for generating attention around a boring but important issue. We know he is negotiating but we don’t see another way in our political climate.
While we disagree with his methods, we don’t see any other workable process in our current political climate.
Conservative ideas for creating good job
Conservatives have few ideas for creating good jobs. Generally, they favor tax cuts, tariffs, and limiting immigration. They see no role for government. Worse, they are attacking the one institution that everyone knows works: education.
Foreign Trade and good paying jobs
No one knows how to create good paying jobs in the United States. Other countries have industrial policies for creating good jobs. Highly educated countries with a strong social safety net do well. So do countries that limit immigration like Denmark. Other countries, like China, Vietnam, Korea or Singapore, have strong industrial policies oriented toward exports.
The United States has done none of the above. Instead, we have a culture that believes in free markets, free trade and survival of the fittest. All the approaches work until they don’t.
China Shock
When the WTO was signed by President Bill Clinton admitting China, in 2001, China’s export economy was already booming. Membership accelerated China’s exports to the US. China became the dominant trading partner of the US for manufacturing.
Mexico and Canada remain the largest trading partners of the United States. They account for <<<>>> of exports and imports. They export food, commodities, energy, manufactured goods, and autos. They also buy significant amounts of US goods, pretty much the same items we buy from them. Mexico and Canada have long been closely integrated into the US economy. China is different in both scale, scope and trade imbalance. China is now closely integrated with US supply chains.
At the same time, India, the Philippines, Brazil and Eastern Europe focused on outsourcing information technology and office jobs.
What went wrong
The president and lawmakers believed the US had an unshakable dominance in high-skilled industries. It was the time of Google, Facebook and Twitter. The US was riding high. The motto of the times was: “We will make computer chips and you will make potato chips.” Few thought about how fast such a technological advantage would erode. The United States was unprepared for what followed. They also failed to consider the low quality of the US education system.
China had two key advantages: cheap and intelligent labor, and a government focused on building an economy through exports. China started with labor-intensive industries, such as shoes and clothing, but quickly worked upstream to other sectors. China targeted key industries like machine tools, industrial products and consumer goods manufacturing. The same industries which used to pay above average salaries in the United States.
China is unique and focused. It used its potential as a giant consumer market to lure US companies to sharing technology. China has also done a lot of things right. It has an excellent education system. China has trained millions in manufacturing and engineering with the goal of becoming a super power. China also limited imports in key sectors of the economy, choosing to build its own capabilities. It acquired intellectual property and knowledge from the US.
US Corporations contributed to the problem. Corporations and financial interest used Chinese manufacturing to make huge profits. Meanwhile, politicians in the United States, many of whom believe in a simplistic free market philosophy, basically looked the other way.
This is where we are.
No, the US is not being taken advantage of
No, other nations are not taking advantage of the United States. The deal is more complex. Other nations are simply exploiting the environment they are given. Nations who are our allies get the benefits of trading with the largest rich nation on Earth. The United States gets low-cost consumer goods and low inflation. The United States gets to decide globally what matters to the world. That relationship has delivered a lot of prosperity to our country and the world.
We are in favor of running trade deficits but limiting the impact on workers. We also want to limit trade benefits to countries that do not share our values such as democratic principals, labor and environmental protections. We are in favor of reducing our imports from China and a gradual approach to fair trade for our allies.
Summary
Trump is correct in trying to reset US trading relationships. Trade must be evaluated on a big picture, strategic basis all part of a larger Industrial policy. That policy includes tariffs, trade policy, strategic trade interests, subsidies, immigration and education and healthcare. We support spending on subsides: subsidies for strategic sectors of the economy, subsidies that create good jobs, and spending on job related social safety net.
We support government spending on:
- subsidies for key sectors
- good jobs
- a stronger social safety net
Every country on the planet except the United States regularly reviews their trade policies and many have an explicit industrial policy. We are in favor of an industrial policy built to help US workers and our allies around the Global. That means decoupling from China.
Trade policy must be evaluated within a broader, strategic framework—one that includes tariffs, subsidies, education, and national priorities.
It is time for an industrial policy that balances corporate and worker interests.
Sources
Comparative Advantage
Neoliberal Economics
Bill Clinton’s trade policy
World Trade Organization
China Shock