Michael Strain of the American Enterprise Institute highlights the latest evidence against protectionist economic policies.
The past two presidential administrations have enthusiastically embraced protectionism in their trade policies, marking a significant departure from the bipartisan consensus of recent decades that supported trade liberalization and free-market economics. … [T]he turn to protectionist and nationalist economic policies has been ineffective by its own standards, failing to raise employment and reduce America’s reliance on China. Moreover, this approach is fundamentally misguided. Economic policymakers should focus on connecting workers to opportunities created from open trade, rather than enacting protectionist policies and attempting to recreate jobs of the past.
The 2018–2019 Tariffs Likely Reduced Manufacturing Employment. Manufacturing employment has been on a downward trajectory since the end of World War II, with no significant changes observed following China’s entry into the WTO or the adoption of protectionist policies. Researchers looking at the effects of Trump’s 2018 tariffs have found that the protection from import competition those tariffs provided was outweighed by two effects: the increased price of intermediate goods and the retaliatory tariffs that other countries imposed on US goods. They found that industries more exposed to tariff increases experienced greater declines in employment. Beyond the manufacturing sector, counties with higher exposure to tariffs experienced higher unemployment rates.
Post 2017 Protectionism Did Not Reduce the US Trade Deficit. Although reducing the trade deficit was a primary goal of the Trump administration, protectionist measures did not accomplish this goal. The current account deficit, which measures the balance on trade in goods and in services, along with income flows between domestic and foreign residents, rose from $85.5 billion when President Trump took office to $180 billion at the end of his term.
Post-2017 Protectionism Did Not Reduce America’s Reliance on China. The extensive tariff regime established in 2017 did reduce the bilateral trade deficit in goods with China by 17.9 percent between 2017 and 2020.
