President-elect
Donald Trump rallied angry voters by blaming trade for the loss of
high-quality jobs. That was hardly an original observation. In fact,
Trump’s predecessor in the White House, Barack Obama, made a similar
case back in 2010.
Obama’s
pitch was different than Trump’s, focused on fixing shortfalls in the
nation’s trading relationships instead of tearing up free-trade deals
and starting over. Specifically, Obama called in his 2010 State of the Union speech
for doubling exports by the end of 2014. This, he said, would create 2
million jobs, and they’d mostly be good-paying jobs in manufacturing. In
other words, it might make America great again.
It didn’t. Trade experts immediately questioned
Obama’s plan, noting that such a dramatic change in a short period of
time would require disruptive changes in exchange rates between the
United States and its trading partners. Punishing US companies for
operating overseas, as Obama proposed, would be counterproductive. And
Obama’s “Buy America” incentives would invite retaliatory measures by
China and others.
The skepticism was justified. By the end of 2014, US exports had risen just 28.2% compared with 2010 levels, according to Census Bureau data.
That was far short of Obama’s goal, which was 100% growth. Exports of
services—which include tourists traveling to the United States—rose
31.9%. Exports of goods—products manufactured in the United States—were
up just 26.6%. And US exports have actually declined since then, with
the pace of exports through the first 10 months of 2016 just 8.3% higher
than during the same period in 2010.
One
thing that frustrated Obama’s goal for exports is a strengthening
dollar—something the president can’t really control, and shouldn’t try
to. The dollar began to appreciate sharply against many other currencies
starting in 2014, as the Federal Reserve began to wind down its
aggressive monetary stimulus plans and investors anticipated higher
interest rates in the United States. As the dollar strengthens, American
exports become more expensive elsewhere, and tend to decline. Imports
become cheaper, and tend to go up.
Imports
have risen by a smaller portion than exports since 2010, which means
the overall trade deficit—$500 billion at the end of 2015—is about the
same as it was in 2010. But Donald Trump, the incoming Republican
president, hammered away at America’s trade deficit during the campaign,
claiming that China and Mexico have been stealing American jobs. His
appeal seems to have worked, since voters in Rust Belt states such as
Pennsylvania and Ohio who have struggled to hold onto blue-collar jobs
helped put Trump over the top.
Obama
essentially fingered the same problem as Trump—a shortfall of good
blue-collar jobs—several years earlier. Had Obama actually been able to
create those two million jobs he promised, it might have dampened
Trump’s appeal.
Now,
the failure of Obama’s export plan serves as a cautionary tale for
Trump. The incoming president says he’ll “get tough” with trade partners
like China and Mexico, negotiating new terms that are more favorable to
the United States. His overall goal is to create 25 million new jobs
within a decade. But there’s no reason to think Trump will be any more
successful than Obama at manipulating an immensely complex part of the
global economy to America’s advantage. Presidents tend to come into
office thinking they can pull the levers of the economy more effectively
than their predecessors. They often leave chastened. And Trump has
promised a lot more than those who came before him.
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