President Trump got not one but two wins on trade last week — a limited, as-of-yet unsigned agreement with China that looks as if it might stem the acceleration of a costly trade war, and a deal with Democrats to ratify a new U.S.-Mexico-Canada trade deal. This may matter quite a bit for Trump and his political future, but not all that much for the U.S. economy.
To understand why, we have to go back to the coalition that put Trump in office and looks set to keep him there through impeachment. Underneath the America first bluster, grift, and bigotry, Donald Trump’s presidency sits on a solid theory. Americans, it goes, who think they and their families were better off in a (largely imagined) past will keep voting to see the trappings of that past restored — even if they don’t see any financial benefit.
Trump’s trade deals are absolutely central to this project. In this version of history, Wall Street and global finance are irrelevant — the U.S. economy is all about selling things that we make. And the U.S. economy reigns as supreme as it did in the 1950s; everyone needs to buy what we make.
In actual fact, in 1960 the U.S. economy produced 60 percent of global income; now it’s less than 20 percent, not because we shrunk but because everyone else grew while recovering from World War II and colonial occupation. Manufacturing and agriculture together contribute just one-quarter of U.S. income — the rest of us are living off services, whether we’re lawyers, brokers, fast-food workers, or columnists.
So Trump’s team has the job of managing international trade in ways that give him a story to tell about selling things made by U.S. workers — even as they understand perfectly well that what keeps the stock market and Trump’s donors afloat isn’t that at all, but an environment in which global financial deals produce maximum profit and minimum regulation. Sometimes Trump’s team seems to understand that the U.S. economy also needs to retain innovation and high-tech firms; other times, like when they demonize the immigrants who have built many of those firms, contributing the fabric of America along the way, not so much.
The U.S.-China deal, if it is eventually signed, gets at exactly zero of the underlying problems in the U.S.-China trade relationship — the ones that both decimated those old-time manufacturing jobs and have chipped away at America’s technological advantage. It does nothing to change how China supports its industries in ways that are against international rules; nor does China even promise to do better at not stealing technologies developed by U.S. companies and workers.
Who does the deal help? U.S. credit card companies, who finally will be allowed to do business in China. It helps major U.S. employers from Apple to Walmart, not because of anything China promised to do, but because Trump will cancel or scale back tariffs that were already, or would soon be, making imports and some electronic components much more expensive for U.S. consumers.
And China promised to buy an unprecedented $50 billion worth of U.S. agricultural products over the next two years — or at least that’s what the White House says. China’s public statements haven’t given a number, and the two sides didn’t release a shared text, which is never a good sign. Assuming China spends something close to that amount, it will be good news for hard-hit U.S. farmers, but it won’t cover the total cost of the losses from two years of Trump tariffs in addition to the bailouts the government has already paid.
So this deal is classic, cynical Trump: Point out a problem, make it bigger, and then claim victory over getting back to the starting place, but with less money and credibility.
The USMCA deal, a successor to NAFTA, is actually a little different, but only because Trump is still fighting with Democrats and organized labor for the allegiance of manufacturing workers and their families, and because the deal had to go through Congress, House Speaker Nancy Pelosi had a big say in what it looked like.
So Trump’s team consulted closely with labor unions throughout the negotiations (something President Obama was criticized for skipping during the failed talks for the Trans-Pacific Partnership trade deal). On top of that, Pelosi and her team used their influence to strengthen the requirement that Mexico do more to protect its own workers — making it less tempting for U.S. manufacturers to seek workers there so they can pay less amid lower safety standards — and to get rid of some drug-company language that would have kept prices higher longer on a class of medicines called biologics.
On this agreement too, however, Trump didn’t do anything like his campaign promise to tear up and totally renegotiate the foundations of the three-country agreement. You’re unlikely to hear his supporters complaining too much about that, though. Because markets and business were so afraid that’s what would happen, they were hugely relieved and pleased that the deal went through. And market analysts think that should mean the economy will keep chugging along without a slowdown.
Trump’s success should yield some lessons for everyone. It is possible to negotiate with your opponents at home and abroad and produce results. Having labor at the table is good policy and good politics. The role of Congress in representing the interests of all Americans in how trade deals are done remains vital.
But a serious president would apply those lessons to the challenges standing between us and longterm economic health. We should curb attacks on our intellectual property and sustain the U.S. advantage in cutting-edge tech, which involves attracting innovators from abroad as well as keeping their innovations. We should reform our tax structures to keep profits and middle-class jobs at home. And we should be investing in our own infrastructure, economy, and education system, without which no trade deal or partnership will enable us to compete. A serious president would attack those problems instead of creating new distractions, but the president is Donald Trump.
