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Donald Trump’s China Trade War Has Backfired on American Companies, Manufacturing

President Donald Trump’s US-China trade war created a manufacturing recession and cost American companies $1.7 trillion in their stock value, per the Federal Reserve Bank of New York and Columbia University.

Trump has said that he wants to transform the manufacturing sector in the United States into a superpower. He is mentioning it now and mentioned it in 2016 when he first ran for president. Trump argued that tariffs would shrink the US trade deficit and force companies to bring back manufacturing jobs to the United States.

However, it was Trump’s policies against China that sent the manufacturing industry into a recession according to ProPublica.

“Farmers, an important Trump political constituency, were compensated for the lost Chinese market with tens of billions of dollars in subsidies — more than the auto companies received during the last recession — and no obligation to repay them,” said ProPublica’s Lydia DePillis. “But manufacturers, faced with higher prices for imported parts, got nothing. That helped drive the sector into a recession — a December 2019 study estimated that the tariffs depressed manufacturing employment in sectors on which they fell most heavily.”

In July 2020, Michigan was down 66,500 manufacturing jobs from July 2019, per Politico. Ohio is down 48,000 manufacturing jobs over the same time period. US manufacturing as a whole is down 720,000 jobs since February.

“When Trump moved to impose tariffs on Chinese steel, aluminum and other products, that only served to accelerate the effect,” said Politico’s Eleanor Mueller. “Higher prices for imports have decreased demand, which — when combined with a global economic slowdown — contributed to depress manufacturing employment.”

“U.S. economic growth slowed, business investment froze, and companies didn’t hire as many people,” said the Washington Post’s Heather Long. “Across the nation, a lot of farmers went bankrupt, and the manufacturing and freight transportation sectors have hit lows not seen since the last recession. Trump’s actions amounted to one of the largest tax increases in years.”

Trump also wanted to close the gap in the United States’ trade deficit. The opposite happened. The services surplus declined and the goods deficit got larger.

“The U.S. goods trade deficit with China continued to grow, reaching a record $419.2 billion in 2018,” said Brookings. “By 2019, the trade deficit had shrunk to $345 billion, roughly the same level as 2016, largely as a result of reduced trade flows. It should be noted that, while the U.S. deficit with China decreased, its overall trade deficit did not. Trump’s unilateral tariffs on China diverted trade flows from China, causing the U.S. trade deficit with Europe, Mexico, Japan, South Korea, and Taiwan to increase as a result.”

After promising to create American manufacturing jobs and to narrow the trade deficit, Trump has failed miserably on both tasks and likely made China an even stronger power with his policies. The US economy also took a hit and DePillis agrees.

“The ultimate results of the phase one trade deal between China and the United States — and the trade war that preceded it — have significantly hurt the American economy without solving the underlying economic concerns that the trade war was meant to resolve.”



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