Carrie Antlfinger/AP Photo
A cattle and soybean farmer in Caledonia, Wisconsin, November 2019
The soldiers have packed their things and shipped out, the tanks have turned around, and the thrumming of aircraft has gone silent. The trade war is over, at least for now, though the unexploded ordnance of tariffs still lines the battlefield.
On consecutive days last week, Congress passed the update to NAFTA and a phase-one trade agreement with China, which is mostly a purchase order for $200 billion in U.S. goods over the next two years. There are legitimate reasons to question whether China will reliably make those purchases and whether America should be signing any agreement in this critical period that doesn’t foreground the climate crisis.
But the unasked question I’ve wondered about is what we got out of the trade war. Did it achieve a single goal that Trump sought? Did it assist any of the left-behind communities meant to be assisted? Where did it leave us?
Challenging Chinese mercantilist dominance had a stated goal of restoring the U.S. manufacturing base. Trump has repeatedly stood in front of men in hard hats, claiming that blue-collar jobs were returning to America. So how’s that going?
The Institute for Supply Management’s most recent manufacturing report shows five straight months of contraction, with the slowdown occurring at a faster rate in December. Demand, new orders, inventories, and backlog all fell. This is the lowest level for manufacturing since the Great Recession ended. Factory jobs declined by 12,000 in the December employment report, along with 8,000 losses in mining and 10,400 in transportation and warehousing (allegedly in boom times thanks to Amazon shipping). Wages in manufacturing have generally been flat the past two years, well below the average wage growth in the private sector. The U.S. economy is strong, but manufacturing—precisely what Trump’s trade policy intended to fix—is in recession.
The common story is that uncertainty drove this production slowdown, along with added costs from the tariffs. But Trump’s theory, repeated over and over, was that tariffs would cause massive in-shoring and job growth. That simply didn’t materialize. It’s true that tight labor markets produce options for out-of-work manufacturing workers. But the plan was not to shift blue-collar factory jobs into retail. The reason why shows up most cleanly in stubbornly low-wage increases, as the job mix shifts to lower-skill, lower-paid work. The trade war put skilled workers further behind, even in a relatively strong economy.
Zeroing in on agriculture, an export champion, reveals even more pain. The value of U.S. agricultural products has dropped during the Trump era, down $17 billion in 2019 from the peak in 2014. Wheat planting is at its lowest level in over a century, as farmers plow into monoculture crops like corn and soybeans. Of course, soybeans have been the biggest casualty of the trade war, with China cutting off purchases. Stockpiles have soared as farmers cannot find buyers. Loans are down and bankruptcies are up, and generations-long family businesses have ceased.
Part of this resulted from flooding in the Midwest that ruined 20 million acres of farmland, but commodity prices were consistently falling even before the trade war. Extreme consolidation of large-scale agriculture and punishing of family farmers is the culprit, and there Trump policy has paid tribute to Big Ag.
The best example is enforcement of the Packers and Stockyards Act, intended to protect family farms from exploitation and unfair treatment. The USDA under Trump first threw out updated rules mandated by Congress back in 2008, then eliminated the agency that enforces the rules (ludicrously folding it into the Agricultural Marketing Service), then putting out new rules that are designed to fail.
Under the rules, any discrimination against farmers can be exempted from violating the law if rationalized as a “cost savings” or “reasonable business decision.” Critics charge that that will legalize the customary and illegal practices meatpackers and producers engage in. Plus, to prove a violation, farmers must show “industry-wide harm” rather than an individual slight, which makes the law almost completely unworkable.
The trade war provided a convenient distraction from these lingering policy problems, leading to a bailout that was twice the size of the auto bailout. But the top 10 percent of farmers received the majority of the assistance, while the average payout for the bottom 80 percent was less than $5,000, according to the Environmental Working Group. The bailout exacerbated inequality among farmers. And now, USDA is pulling the bailout money away, as if the phase-one deal solves deep-seated problems in agricultural markets.
We are told that the combination of the reworked NAFTA and the China deal will create a more favorable playing field for U.S. exports. I’m not sure why. The U.S.-Mexico-Canada agreement (USMCA) offers next to no changes in the aggregate: The most optimistic reading of the economic impact comes to 0.02 percentage points of GDP per year. The labor reforms in Mexico are a potential gain—already unions are credibly threatening strikes—but there’s nothing that blocks companies from simply shifting the race to the bottom elsewhere.
The best claims that Big Ag boosters can muster are that USMCA “sets a precedent” that America “is open for business.” That’s code for saying it does nothing of consequence. Some slight increases in quota restrictions for dairy in Canada will not offset the gradual destruction of U.S. dairy markets.
What about the China deal? First, China promises not to steal technology from U.S. companies siting their factories there. That will obviously accelerate outsourcing to China, as multinationals need not fear any theft. Second, there’s this vague promise of $200 billion in purchases. Chinese officials have stated that buying will proceed on “market principles,” an odd comment to make about an alleged mandatory set of purchases. China hasn’t indicated what goods they will buy, and there’s no third-party mechanism to enforce the sales. If this actually sums out, I’d be surprised.
China did purchase a lot of soybeans recently, but it has intimated that those will be the last large-scale soybean purchases for months; they have other suppliers, plus demand has dropped because swine fever reduces the need for soybeans as pig feed. Pork could be an area for purchases, but of course the number one pork producer in America is Smithfield Foods, a division of China’s WH Group. So that amounts to China committing to buy from China.
Meanwhile, as Matt Stoller has been detailing, America has been rapidly losing its industrial know-how, with industry lobbyists claiming that the nation lacks the ability to make prom dresses and even Bibles. It’s not clear whether there are $77.7 billion of manufactured goods available for China to buy.
So that’s where we’re at. Trump pursued a trade war that failed to arrest the hollowing-out of America’s industrial base. Recessions in manufacturing and near-depressions in family farm agriculture followed. The subsequent deals offer little hope of a revival. The U.S. has needed a transformation of its trade relationship for some time, particularly as it relates to China. But if the goal here was to boost manufacturing and exports, it failed. Utterly.
