After an eight-month review of the United States' trade policies toward China, the Biden administration has concluded that Donald Trump was right, and Joe Biden was wrong. On the campaign trail, Biden relentlessly attacked Trump's tariffs on Chinese goods, calling them "disastrous." Now, he has adopted those same "disastrous" policies.
But candidate Biden was right: Trump's tariffs did not work. China's behavior did not change, high-wage jobs did not come back, and while the U.S. deficit with China decreased, this caused the overall U.S. trade deficit to go up. Beijing responded in kind, slapping its own tariffs on American goods. One 2020 study found that "approximately 100 percent" of the costs of the U.S. tariffs against Chinese goods were paid for by American consumers and businesses. A 2021 study found that the tariffs cost the U.S. economy up to 245,000 jobs.
Trade policy in Washington has become an encrusted bipartisan ideology, driven by a set of unquestioned assumptions. But as Adam S. Posen, president of the Peterson Institute for International Economics, points out in a brilliant Foreign Affairs essay, every one of these assumptions is wrong.
We have embraced the dogma that over the past two decades, America opened up its economy to the world and that American workers suffered as a result. But the facts show the opposite. Posen writes, "[The United States] has increasingly insulated the economy from foreign competition, while the rest of the world has continued to open up and integrate."
Much of the impetus for protectionism in general and toward China in particular has come from claims that trade with China was responsible for about 2 million U.S. manufacturing jobs lost -- the "China shock." That sounds like a huge number until you put it into context. The number is for the period 2000 to 2015, so the average number of jobs lost each year was around 130,000.
How many jobs do American workers lose in a typical year through the normal churning of the U.S. economy? 60 million. Of those, a third are voluntary and a third can be attributed to causes not related to foreign trade, such as an employer closing or relocating -- leaving a third, 20 million, caused by external shocks.
Posen points out that only about 16% of non-college-educated workers are employed in the manufacturing sector. And much of the decline in manufacturing jobs, if not most of it, can be attributed to changes in technology rather than trade. The United States' manufacturing output keeps rising, even as the number of workers it takes to produce those products has fallen over time.
This is not just a U.S. trend. Posen's institute produced a chart tracking manufacturing employment in Ohio over the last three decades and compared it to Germany's North Rhine-Westphalia (a similarly important manufacturing region). Unlike the United States, Germany has a trade surplus. It provides much governmental assistance for manufacturing, which is seen as the heart of the German economy. Yet the job losses are even more pronounced in Germany. Even China has overall been losing manufacturing jobs as its economy branches into software and services.
Posen points out that the chief reason for many of the United States' economic inequities and discontents is not open trade but stingy domestic spending. He argues that all workers would gain from a more secure safety net, one in which benefits such as health care are "portable," meaning not tied to employment. That is where misguided market economics have distorted public policy. More and better benefits -- of the kind President Biden is proposing -- would help displaced workers, reduce inequality and improve job-readiness.
Writing all this sometimes feels pointless. Protectionism has become one of those zombie ideas that continue to move forward despite all the evidence showing them to be wrong. Most worryingly, it is part of a sea change in the United States' basic outlook. From an optimistic and confident view that we can thrive in a world in which others also do well -- a view borne out by the data -- we are now retreating to a cold, curdled view of international life, one that is dark and zero-sum, in which we search for villains to blame for our problems. It's a world in which we try to gain some narrow benefit for ourselves by cheating everyone else. In other words, it is the Donald Trump way.
Fareed Zakaria writes for the Washington Post.