This topic is so crucial to the (increasingly bleak) project of re-aligning the GOP toward a populist party under Trump, that we will have to split this up into an ongoing series of posts on the unique role of manufacturing in providing prosperity for the working and middle classes, and how manufacturing's prospects are determined by trade policy, such as allowing companies to off-shore their production to countries where labor is cheaper, decimating American workers, their families, and their communities.
For now, we will review the trajectory of trade deficits since Trump has taken office.
On the campaign trail, Trump devoted time at every rally and interview to slamming our unbalanced trade deficits with other countries, especially with Mexico and Asian countries, where American companies have transferred factories to be operated by cheap labor.
During the prosperous period of our nation's history, we ran trade surpluses rather than deficits -- right up through the early 1970s. Since the second half of the '70s, we have been consistently running trade deficits, and they have been growing wider. This coincides with stagnating and declining standards of living for most people other than the elites, whose standards have been taking off like a rocket.
Although underway by the Carter administration, these deficits get much worse when the cheap labor lobby inks a major free trade deal such as NAFTA, or letting China into the World Trade Organization.
As a candidate, Trump sought to gut these free trade deals, which would then restore the trade balance to a surplus rather than a deficit, which would go along with good-paying manufacturing jobs returning to this country, which would raise incomes for working and middle class Americans -- and that higher pay would be paid by the elite employer class, so that inequality would narrow from both directions (higher wages for workers, lower profits for stockholders, identical prices for consumers).
And yet under the GOP-controlled government, trade deficits have been widening, not narrowing. See here for data by country, which is sorted by year from 1985 through today, at monthly intervals.
We are only looking at the "trade in goods" rather than "in services" because the service industries where we dominate relative to other countries do not provide many jobs, and are at the elite pay level. For example, some American lawyer who does consulting work for a Chinese bank that wants to enter the American financial services sector, and needs to know the ins and outs of the American laws that regulate banking.
We're focused on the middle and working classes, and we do not net-export services at that income level. I'm sure when you do look at services done by working and middle class people, like answering phones at a call center, we're running massive deficits there too.
From January through October, our trade deficit with the entire world is 8% bigger than the same period last year. After the final two months of data are in, the year's deficit will still probably be 7-8% bigger than it was for 2016. It will wind up a bit under $800 billion, the highest it has been since the twilight years of the Housing Bubble. It actually declined and rose only meagerly under the following two terms of Democrat rule.
Just to pick two countries that Trump rightly railed against regarding trade deficits, let's look at China and Mexico. Our deficit with China has grown by 7% for the year so far, and will round out the year that way as well. This is within the range that we saw under Obama, although it will be the largest amount ever, at around $370 billion. Our deficit with Mexico has grown by an even faster rate, by 10%, which is a higher rate than most of Obama's years. It will wind up around $70 billion -- also the highest it's been since 2007.
Go on down the list of countries with whom we have the biggest trade deficits in Asia -- they will all be the same or worse. Especially for up-and-coming countries like Vietnam, whose rapid ascent Trump warned about constantly on the trail. Our deficit with them will explode by a whopping 20%, at just under $40 billion.
Why is this bad? For economic and for political reasons.
Economically, the continued rise in trade deficits, at even higher rates than under Obama, signals the continued de-industrialization of our economy. Mexico and Asia are not producing the same kinds of things we are, only better -- rather, they are producing manufactured goods, while we do agricultural products.
"Japan sends us cars by the shipload, and all we send them -- is beef. And wheat. And corn."
Manufactured goods are expensive and their industry pays high wages, while agricultural products are cheap and their industry pays diddly squat -- when that labor is even done by Americans (more likely by immigrants, legal or illegal).
The trade imbalance reflects the structural differences in our economies -- they have industrialized manufacturing, like an advanced economy, and we have agriculture and natural resources like a backward economy of 5,000 years ago. (But don't worry, here in America you also have a one-in-a-million chance of getting into a truly advanced career like legal consulting to foreign banks, or a know-nothing pundit for a media monopoly outlet, where you'll make a killing.)
As our trade deficits widen, it shows the further impoverishment of the working and middle classes here.
Politically, the widening deficits reveal the inability of Trump and his trade hawk advisors to steer the federal agencies, the lawmakers in Congress, and the decision-makers at American companies in the direction of re-industrializing our economy.
Without those results, Rust Belt voters will be much less enthusiastic about turning out to vote Republican again, and may go back to the Democrats, who are more reliable on trade policy and protecting manufacturing jobs. That choice will be even easier because Democrat politicians from the Rust Belt run on these populist issues, rather than the off-putting identity politics of a corporate shill like Nancy Pelosi. Midwestern Republicans are openly the country club yuppie elitist party, and none will be able to even ape Trump on economic policy, let alone deliver.
The more disturbing lesson is that Trump and the trade hawks will have failed to deliver despite belonging to the same party as the heads of the executive-branch agencies and both houses of Congress. Obviously that is damning not of Trump, Lighthizer, Navarro, et al., but of the GOP politicians and civil servants as a whole. They will be standing in mutiny against the supposed leader of their party, who is communicating the will of their own party's voters (and the general electorate), and suffering no consequences.
We know it is an outright mutiny because Trump specifically demanded tariffs from his economic team and General Kelly, as that member of the Pentagon junta took over as Chief of Staff back in August. Tariffs could penalize American companies who off-shore production, and would restore manufacturing jobs here, reducing the trade deficit as we made our own products rather than import cheap crap from China and Mexico.
Trump was already complaining at the end of July about the lack of tariffs, and none are on the way despite vociferously demanding them from his team.
Again, the Republicans are not simply halting progress, or slow-walking it -- the trade deficits are getting worse, and by a similar rate or faster than under Obama. Far from expressing concern over the widening deficits, they are forging ahead with GOP business as usual, chuckling at the Trump movement's expense, and have yet to pay the price for it. The elite factions that control the GOP are simply too reliant on cheap labor, representing labor-intensive sectors of the economy, but that's for another post.
At least in the short-term, it will be far easier to re-align the Democrats to be trade hawks and re-industrializers than the Republicans. Their politicians' records on trade deals are far better (again, a topic for another post), and they are in league with unions whose collective power would be ruined if their industries were sent overseas. And there is a populist insurgency within their party (the Bernie revolution) that is on the brink of taking over the wheel, however slowly or rapidly it winds up proceeding in their new direction.
We keep looking for signs of an economic populist re-alignment from the government totally controlled by the GOP -- and we keep coming up with "they are only doubling down on corporate elitism". They sense their terminal decline as a presidential party, and are using Trump's shock victory to ram through all the elitist bullshit they've been dreaming of but could never win an election on.
If their results destroy Trump's image as a populist, the GOP doesn't care. And if it makes Rust Belt voters go back to voting blue, they don't care either. They're perfectly happy to lose the White House after they've rammed through their limited number of Big Policy Ideas that everyone hates.
They may even give up after tax cuts, which they know like the back of their hand. Maybe a knowingly futile attempt at gutting the social safety net, just to run out the clock. Really -- what other Big Policy Ideas do they have waiting in the wings? They didn't even know what the fuck to do with Obamacare. Hence the constant beating of the war drums -- the only other thing the GOP knows like the back of its hand, launching and losing pointless wars. This time against an even less beatable nation than Iraq, and that has never attacked us -- Iran.
All the ideas and plans, all the action and excitement, is going to be on the Democrats' side, as the Bernie revolution wrings more and more concessions from their party's Establishment. The independents who were decisive in winning the election for Trump now know where to direct our time, money, and effort in order to Make America Great Again -- and it's not the GOP.