“During former President Donald Trump’s term in office, he promised that higher tariffs on American imports would reduce the country’s large trade deficit.
At the time, many economists disputed that notion. Tariffs might marginally reduce the import side of the trade ledger, but they also reduce economic output (and therefore exports), so the net effect on the trade deficit was likely to be minuscule, they warned.
No matter. In 2017, the White House’s official Trade Policy Agenda highlighted how America’s manufacturing trade deficit had grown from $317 billion in 2000 to $648 billion in 2016. That was evidence, the document claimed, that greater levels of trade had triggered “a period of slowed GDP growth, weak employment growth, and sharp net loss of manufacturing employment in the United States.”
You know what happened next. Tariffs were raised. Then more tariffs were added. President Joe Biden took over and left Trump’s higher tariffs in place. American businesses and consumers paid the cost of those higher taxes. The average tariff rate on imports to the United States has climbed from 1.5 percent to over 3 percent, and annual tariff revenue has nearly tripled.
So what happened to the trade deficit? It didn’t fall.
In 2017, the last full year before Trump’s tariffs were imposed, America’s overall trade deficit was $517 billion. By 2023, it had grown to $785 billion, according to new Census Bureau data.
The story is the same when you look at the manufacturing trade deficit, the narrower category that the Trump administration had highlighted in that 2017 report. It climbed to over $1 trillion by 2021, nearly 60 percent higher than the 2016 figure that was cited by the White House as evidence that free trade was a failure.
Rather than reducing the manufacturing trade deficit, the higher tariffs likely led to its sharp increase, writes Ed Gresser, a former assistant U.S. Trade Representative. “Manufacturers import goods so as to turn them into other goods, and are big tariff payers,” writes Gresser in a post for the Progressive Policy Institute, where he now works as vice president for trade policy. “So the tariffs raised the costs of industries like automobiles, machinery, and toolmaking; they faced a bit more challenges competing against imports and succeeding as exporters; and the overall goods/services deficit grew more concentrated in manufacturing.””
“”I don’t think we’re going to see a deal like we saw in the first term,” Robert O’Brien, Trump’s fourth and final national security advisor, told Chalfant. “I think people were generally happy with [the previous deal], but as it turned out, the Chinese didn’t honor it.””
“Trump’s presidency overturned decades of a generally pro-trade Republican consensus and ushered in an era of assuming that trade is bad for American workers and consumers. He hiked tariffs on steel, aluminum, solar panels, washing machines, and a wide range of Chinese goods. For Trump and his allies, those higher tariffs—which were directly paid by American importers and consumers—were meant to reconfigure the trading relationship between America and China.
But Christie is exactly right. It failed.
The one material thing Trump’s trade war accomplished was a so-called “phase one” trade deal with China, which he signed with Chinese President Xi Jinping to much fanfare in December 2019. That deal included a promise that China would buy $200 million more American exports annually. Those increased purchases were supposed to be spread across multiple sectors of the American export economy, something Trump promised would provide much-needed relief to farmers, manufacturers, and other businesses harmed by the tariffs he’d imposed since taking office.
China didn’t do that. According to an analysis by the Peterson Institute for International Economics, American exports to China didn’t even reach pre-trade-war levels in the first year that “deal” was in place. Both countries seem to have quietly dropped any pretense of following through on the agreement.”
“Which company is the leading maker of the so-called “high-priority battlefield items” trafficked to Russia that the Western coalition wants to interdict?
If you said Intel, then go to the top of the class: According to the sanctions team at the Kyiv School of Economics, the U.S. semiconductor giant again leads the pack this year. It’s followed by Huawei of China. Then come Analog Devices, AMD, Texas Instruments and IBM — all of which are American.
Russian imports of microelectronics, wireless and satellite navigation systems and other critical parts subject to sanctions have recovered to near pre-war levels with a monthly run rate of $900 million in the first nine months of this year, according to a forthcoming report from the Kyiv School’s analytical center, the KSE Institute.
All of this indicates that, while Western sanctions imposed over Russia’s full-scale invasion on February 24, 2022, had a temporary impact, Moscow and its helpers have largely succeeded in reconfiguring supply chains — with the help of China, Hong Kong and countries in Russia’s backyard like Kazakhstan and NATO member Turkey.”
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“In our investigations, we showed how U.S.-made sniper ammunition finds its way into Russian rifles, and how China has positioned itself as Russia’s go-to supplier of nonlethal, but militarily useful, equipment.”
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“Russians with close ties to Putin — and their money — continue to be more than welcome in Europe despite the death and destruction his regime has unleashed. His former wife, Lyudmila, and her new partner have splashed the cash on luxury property investments in Spain, Switzerland and France, as a POLITICO investigation found at the start of the year.
And when the European Council — the intergovernmental branch of the EU — does sanction Russian business leaders suspected of aiding and abetting the Putin regime, it has often relied on slipshod evidence that makes the decisions easy to challenge in court, POLITICO has also found.
Nearly 1,600 Western multinationals continue, meanwhile, to do business in Russia. Many that announced they would pull out have struggled to do so, as POLITICO discovered when it investigated Western liquor companies that said they had quit Russia — only to find that their booze was still freely available. And some companies that did stay, like Danone and Carlsberg, have been shaken down by Putin and his cronies — a case of Russian roulette, if ever there was one.”
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“With the EU apparently lacking the means, or the political will, to do more to economically isolate Russia, the bloc is sending its sanctions envoy, David O’Sullivan, on a mission to apply moral suasion to countries that are, as he diplomatically puts it, “not aligned” on sanctions.
On the high-priority battlefield technology, Sullivan told POLITICO’s EU Confidential podcast last month that the EU has had “a limited success — but in an area which is absolutely critical to the defense of Ukraine.”
More broadly, he said: “The sanctions are a sort of slow puncture of the Russian economy. Perhaps not the blowout that some people initially predicted, but … the air is escaping from the tire and sooner or later the vehicle is going to become impossible to drive.”
To be fair, O’Sullivan isn’t overselling the efficacy of sanctions. And he may ultimately be proven right.
But he only will be vindicated if Western governments do a better job of holding their own businesses to account in stemming the flows of technology, equipment and spare parts that sustain Putin and his war of aggression.
That will come down to whether they have the will to enforce their decisions. And the evidence so far is that they don’t.”
“The E.U. imposed retaliatory tariffs on American whiskey (along with other quintessentially American products like blue jeans and motorcycles) in June 2018 after the Trump administration unilaterally slapped tariffs on all imported steel and aluminum. Trump’s tariffs were sold as an anti-China measure, but covered imports from allies like the E.U. and South Korea as well. The E.U.’s retaliatory tariffs, meanwhile, occurred despite promises from Trump’s top trade adviser that other countries would not respond with tariffs targeting American goods.
Due to those 25 percent tariffs, whiskey exports to Europe fell by about 20 percent between 2018 and 2021, according to the Distilled Spirits Council of the United States (DISCUS), which lobbies on behalf of American booze producers. That decline in foreign sales cost American distilleries over $100 million.
Those tariffs were temporarily suspended in 2022, and exports to Europe rebounded almost immediately, according to DISCUS’ data. Over the past two years, exports to the E.U. increased by 29 percent and exceeded pre-tariff levels.
Now that recent growth is at risk. If no deal is reached by January 1, the E.U. could decide to reimpose the tariffs at 50 percent—double the previous levels—when the temporary reprieve expires.”
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“Trump’s been out of office for nearly three years, but the consequences of his half-baked trade wars are still spiraling out of control—in no small part because of Biden’s unwillingness to end them. Another escalation in that conflict now looms over American distillers.”
“Much of the banter surrounding the rise of China’s electric vehicle (E.V.) industry and the implication for the global economy is misleadingly alarmist. When our government gets involved in such narratives, it calls into question the sincerity of its insistence that E.V.s are essential to an existential battle against climate change. If China’s foray succeeds, the world gets cleaner cars and non-Chinese automakers are obliged to improve their own products.”
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“any related national security concerns are often rooted in misconceptions about the technologies themselves. It’s important to differentiate between civilian and military technologies. E.V. manufacturing primarily involves civilian tech that’s unlikely to have significant national security implications.”
“Biden declared a new national emergency and immediately used it as the justification for creating a new screening system that will limit Americans’ ability to invest overseas.
The new rules, which have been in development since last year, will prohibit private equity and venture capital firms from investing in China-based businesses working in a variety of high-tech fields”
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“Narrow or not, this is the first time that the U.S. government has targeted outgoing investments in such a manner.”
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“There are only two other countries—South Korea and Taiwan—that have outbound investment screening systems”
“”China will impose export restrictions on industrial products and materials containing gallium and germanium from August 1 to ensure its national security and interests,” China Daily, a mouthpiece for the Chinese Communist Party, announced this week. “According to the relevant provisions of China’s Export Control Law, Foreign Trade Law and Customs Law, gallium, which is used in the production of semiconductors and optoelectronic devices, and germanium, an important raw material for the semiconductor industry, as well as their related products, cannot be exported without permission after July. Export of other industrial materials such as gallium nitride, gallium oxide and zone-refined germanium ingot have also been prohibited.”
That’s a big deal because, according to the Observatory of Economic Complexity, “in 2021 the top exporters of Gallium, germanium, hafnium, indium, niobium (columbium), rhenium and vanadium: articles thereof, unwrought, including waste and scrap, powders were China ($170M), Chinese Taipei ($53.2M), Germany ($52.4M), Brazil ($43.1M), and South Korea ($32.4M).” China alone is responsible for 29.4 percent of the total (the U.S. is also an exporter, with a 5.47 percent share.)
Specifically breaking out the two restricted minerals, Reuters adds that China produces roughly 60 percent of the world’s germanium and 80 percent of gallium. So, there’s a lot at stake here for computer chip producers and for governments trying to promote domestic producers at the expense of Chinese competitors.”
How Tariffs and the Trade War Hurt U.S. Agriculture Alex Durante. 2022 7 25. Tax Foundation. Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions Erica York. 2022 4 1. Tax Foundation. Lessons from the 2002 Bush Steel Tariffs Erica York.