Record U.S. trade deficit in 2018 reflects failure of Trump’s trade policies
The U.S. Census Bureau reported that the U.S. goods trade deficit reached a record of $891.3 billion in 2018, an increase of $83.8 billion (10.4 percent). The broader goods and services deficit reached $621.0 billion in 2018, an increase of $68.8 billion (12.5 percent). The rapid growth of U.S. trade deficits reflect the failure of Trump administration trade policies, as well as the negative impacts of tax cuts and spending increases, which have sharply increased the federal budget deficit, and tightening of U.S. monetary policy, resulting in upward pressure on interest rates and the real value of the dollar.
The IMF predicts that the U.S. current account deficit—the broadest measure of U.S. trade in goods, services, and income—will nearly double between 2016 and 2022. Unless these trends are offset by a rapid decline in the value of the U.S. dollar, rapidly rising trade deficits could be devastating for U.S. manufacturing, likely giving rise to massive job loss on the scale experienced in the 2000–2007 period, when 3.5 million U.S. manufacturing jobs were lost.
The U.S. goods trade deficit with China reached a new record of $419.2 billion in 2018, up from $375.6 billion in 2017, an increase of $43.6 billion (11.6 percent). United States trade with China is dominated by the deficit in manufactured products. Although the United States has imposed tariffs of 10 to 25 percent on $250 billion in imports from China (about half of total U.S. imports from that country), China has played its ‘ace-in-the-hole’ by allowing it’s currency to fall by roughly 10 percent against the dollar. As a result, the U.S. trade deficit with China increased faster (11.6 percent) than the U.S. deficit with the world as a whole (10.4 percent). While the United States and China are poised to negotiate a deal to end their trade dispute, the proposed deal amounts “much ado about nothing much,” as Paul Krugman puts it. It will do little to reduce the massive imbalance in U.S.–China trade flows.
When will ‘Buy American’ really mean buy American?
Our government’s procurement policy falls far short of its potential to encourage and support good jobs in domestic manufacturing. We need to strengthen domestic sourcing requirements for publicly funded programs, including those intended to repair our failing infrastructure. While the recently issued “Executive Order on Strengthening Buy-American Preferences for Infrastructure Projects” is an improvement over the status quo, it falls far short of making the substantive improvements that are needed to make sure that “Buy American” actually means buying American.
To begin, the EO does nothing to strengthen domestic content requirements that agencies use to determine if a good is “domestically sourced”—that is, actually made in the United States. Many Americans would be startled to learn that a product requires only 51 percent U.S. content to be considered domestically made under the Buy American Act, which applies to federal government procurement. This does not even take into account the substantial transformation test, when a product is deemed domestic even if it is “made at least in part from materials manufactured in another country,” a special concern for the federal government’s procurement of the equipment and construction materials that are required for infrastructure projects.
In contrast, the Federal Trade Commission requires that the entire product be made substantially domestically in order to satisfy its definition of “Made in the U.S.A.,” although much more must be done to ensure that the FTC rules are effectively enforced.
There’s nothing radical about Elizabeth Warren’s proposal for universal childcare
The right-wing punditry machine has gone into full spin cycle as Democratic presidential candidates throw their hats into the ring, ready to brand any initiative that might ameliorate the lot of working families as radical or, worse in American political parlance, “socialist.”
That has certainly been the case with Senator Elizabeth Warren’s proposal for universal child care. But there’s nothing radical or socialist about her plan, which represents a sensible, evidence-based, practical, and much-needed strategy that tackles several critical national crises in one neat package. And it doesn’t even take money away from the GOP’s sacred cows of military spending and border security.
What crises do Warren’s proposal address? Let’s review:
First, and perhaps foremost, the majority of American families currently struggle to get their young children into child care that is decent, let alone of high quality. And for a substantial subgroup in the bottom quintile of the wage distribution, “struggle” is an understatement. For example, a 2015 EPI study showed that a single parent with one child who worked full-time for the minimum wage would not be able to sustain a modest but adequate lifestyle due to the high cost of child care.
Warren’s plan, which would make high-quality care free for families living at up to 200 percent of the federal poverty line and institute a sliding scale above that, with no family paying more than seven percent of their income, would do away entirely with that problem. Families that currently must choose among rent, food, and keeping their toddlers safe can now have all three, and middle-class families can invest in other child development activities and resources. Sounds a lot better than a wall already.
Stark black–white divide in wages is widening further
One of the most striking features of U.S. racial inequality is just how stubborn the wage gap between black and white workers has remained over the last four decades.
That trend was evident in EPI’s new State of Working America (SWA) Wages report, which highlights trends in wages across the wage distribution, by education, as well as by gender, race, and ethnicity.
Overall, the findings indicate wages are slowly improving with the growing economy, but wage inequality has grown and wage gaps have persisted, and in some cases, worsened. In this post, I will highlight one particular worsening wage gap and look at it from multiple dimensions. Since 2000, by any way it’s measured, the wage gap between black and white workers has grown significantly.
The findings here support the important research by Valerie Wilson and William M. Rodgers III, which shows that black–white wage gaps expanded with rising wage inequality from 1979 to 2015. Where their report is incredibly comprehensive, the trends outlined here are rudimentary, but reinforce the same basic truths.
In the figure below, I’ve collected some of the main findings on the black–white wage gap found both in the latest SWA report as well as the SWA data library. Using various measures, I compare wages for black and white workers over the last 18 years, highlighting the gaps in wages in 2000, the last time the economy was closest to full employment, 2007, the last business cycle peak before the Great Recession, and 2018, the latest data available.
Against these benchmarks, I illustrated the growth in the average gap; the gap for low-, middle-, and high-wage workers; the gap for workers with a high school diploma, a college degree, and an advanced degree; and a regression-adjusted wage gap (controlling for age, gender, education, and region).
Black women’s labor market history reveals deep-seated race and gender discrimination
The black woman’s experience in America provides arguably the most overwhelming evidence of the persistent and ongoing drag from gender and race discrimination on the economic fate of workers and families.
Black women’s labor market position is the result of employer practices and government policies that disadvantaged black women relative to white women and men. Negative representations of black womanhood have reinforced these discriminatory practices and policies. Since the era of slavery, the dominant view of black women has been that they should be workers, a view that contributed to their devaluation as mothers with caregiving needs at home. African-American women’s unique labor market history and current occupational status reflects these beliefs and practices.
Compared with other women in the United States, black women have always had the highest levels of labor market participation regardless of age, marital status, or presence of children at home. In 1880, 35.4 percent of married black women and 73.3 percent of single black women were in the labor force compared with only 7.3 percent of married white women and 23.8 percent of single white women. Black women’s higher participation rates extended over their lifetimes, even after marriage, while white women typically left the labor force after marriage.
Differences in black and white women’s labor participation were due not only to the societal expectation of black women’s gainful employment but also to labor market discrimination against black men which resulted in lower wages and less stable employment compared to white men. Consequently, married black women have a long history of being financial contributors—even co-breadwinners—to two-parent households because of black men’s precarious labor market position.
Black women’s main jobs historically have been in low-wage agriculture and domestic service.1 Even after migration to the north during the 20th century, most employers would only hire black women in domestic service work.2 Revealingly, although whites have devalued black women as mothers to their own children, black women have been the most likely of all women to be employed in the low-wage women’s jobs that involve cooking, cleaning, and caregiving even though this work is associated with mothering more broadly.
Trump’s national emergency declaration over the border wall is dangerous and not justified by the facts
Where, exactly, is the national emergency?
Both houses of Congress have now passed appropriations legislation to fund the government for the fiscal year, and it’s become clear they will not provide President Donald Trump with the full $5.7 billion he requested to fund construction of a wall on the southern border.
Trump has been so desperate to fund his signature campaign promise that he’s gone so far as to shut down the government over it for over a month, which caused federal employees to suffer and billions of dollars-worth of economic losses. In response to failing to get the money from Congress, Trump is declaring a national emergency to achieve the same ends by different means.
An emergency declaration, the president hopes, will allow him to access alternative streams of funding that will go towards funding the wall’s construction. Reuters reports the Trump administration expects to be able to allocate about $7 billion from two defense funds and a Treasury forfeiture fund as a result of an emergency declaration. This would be an extreme step that is unjustified by the facts because there is no ongoing national emergency at the southern border under any reasonable definition of the term.
Many on the right and left are unhappy with the legislation passed by Congress. Some conservative pundits and advocates are unhappy that it does not provide larger funding increases for immigration enforcement, going as far as saying that it will lead to “open borders.”
Some progressive legislators and advocates are opposing the legislation because it funds too much immigration enforcement and does little to rein in Immigration and Customs Enforcement (ICE) and Customs and Border Patrol (CBP), especially in light of recent internal criticisms of mismanagement, abuses of detainees, and policies that are being challenged in the courts for being inconsistent with domestic and international law. (The Democratic legislators in opposition, however, do not support another shutdown, and prefer that Congress pass a continuing resolution that would keep the government funded at current levels.) Trump expressed displeasure even before the legislation passed, noting earlier this week that the provisions included were “not doing the trick.”
Let’s not forget unions and collective action when discussing victories on workers’ rights
Too often in our public discourse about workplace issues, the crucial role of labor unions and the legal right of workers to join together in collective action to improve their working conditions is forgotten or ignored.
In a column about the importance of pay transparency in achieving pay equity published in The New York Times last month (“Want to Close the Pay Gap? Try Transparency,” Jan. 21, 2019), the author outlines possible policy measures to protect workers when they discuss pay with their co-workers. Yet in a rather stark omission, the piece ignores the reality that existing federal law—the New Deal-era National Labor Relations Act—currently protects the right of private-sector workers to discuss pay with one another. It also overlooks the millions of unionized workers who currently benefit from the pay transparency that a collective bargaining agreement provides.
In late November, The Washington Post ran an op-ed about the challenges of effectively addressing sexual harassment in the workplace. The column gave credit to the American Hotel & Lodging Association—the hotel industry lobby—for providing panic buttons to hotel workers to protect them from harassment and assault by hotel guests.
In fact, the trade association was merely following the lead of UNITE-HERE, the hotel workers union, which won panic buttons and other protections for both union and nonunion hotel workers in Chicago and other cities through collective bargaining and legislative activity. (The author also omitted the fact that the hotel association was in the middle of a lawsuit seeking to strike down a Seattle ballot initiative approved by 70 percent of the voters providing panic buttons to hotel workers—yes, the very protection they group had just been credited for.)
The state of American manufacturing: The failure of Trump’s trade and economic policies
Separating fact from fiction is always tough when listening to President Trump, who lives in his own, fact-free fantasy-world. This is particularly so when it comes to trade and manufacturing. Here are a few key points on that topic to keep in mind when listening to his State of the Union address. There’s a lot that can be done to create millions of good manufacturing jobs for working Americans, but not the way this president is going about it.
- The trade deficit is growing more than twice as fast as the overall economy, because of the Trump administration’s trade and economic policies. The total U.S. goods trade deficit has increased 18.1 percent since 2016, and our trade deficit with China has grown even faster, 20.5 percent in the same period (annual estimates, based on year to date trade through October). Growing trade deficits over the past two decades are the single largest cause of the loss of roughly 5 million U.S. manufacturing jobs.
- The Trump administration has failed to end currency manipulation and dollar misalignment, despite Trump’s promise to name China a currency manipulator on day one upon taking office. Currency misalignment is the single largest cause of growing U.S. trade deficits. U.S. trade can be rebalanced, creating millions of good manufacturing jobs, by lowering the value of the dollar by about 25 percent. The failure to end currency misalignment is a major cause of GM’s recent decision to close 5 manufacturing plants and outsource production, eliminating 12,000 jobs, and Ford’s plan to reduce its workforce by 12 percent, eliminating 24,000 jobs.
- Trump’s massive tax cuts (for corporations and the wealthy) and spending increases are expanding the federal budget deficit, pushing up the value of the dollar and the U.S. trade deficit. The dollar has increased 20 percent since 2013, including 5 percent in 2018 alone. As a result, the IMF now predicts that the broadest measure of the U.S. trade deficit will nearly double between 2017 and 2022. Growing trade deficits will decimate manufacturing over the next few years, and could push the United States into a recession.
Trump’s hateful border wall fantasy would do nothing to address the real immigration crisis
For well over a month, President Donald Trump has demanded Congress pass appropriations legislation to fund the government that includes $5.7 billion for his administration to build additional miles of wall and fencing on the southern border. The president claims that the result of building a border wall will be that “CRIME WILL FALL,” and is threatening to declare a national state of emergency in order to get the funds he wants to begin construction.
When Democrats refused to give in to the president’s demands in December 2018, he caused the longest government shutdown in history before ultimately signing legislation on January 25 to reopen the government for three weeks, until February 15. This is intended to give a bipartisan committee of members of Congress time to agree to fiscal year 2019 appropriations legislation that includes new border security funds. Today the president is scheduled to give his annual State of the Union speech, and it’s been widely reported he will again threaten to declare a state of emergency to get what he wants—or even make a definitive statement about an emergency declaration.
The president’s focus on the wall and border security is misguided, and does little to address today’s realities on the border. There the U.S. immigration system certainly faces challenges, but the president isn’t proposing valid solutions. Instead, he’s trying to scare the public by muddling the issue with alarmist language and false statistics.
The reality at the border is this: The overall size of the unauthorized immigrant population has declined to its lowest level in a decade. And while a wall is mainly designed to keep out unauthorized border crossers, the number of migrants being apprehended for attempting to enter the United States without authorization is lower than it has been in decades. The numbers that are growing, however, are the share of total apprehensions by U.S. Customs and Border Protection (CBP) that consist of families and unaccompanied minors, as well as the number of families who present themselves voluntarily before CBP. Many then go on to request asylum once in CBP custody.
Before the State of the Union, a fact check on black unemployment
The historically low black unemployment rate has become one of Donald Trump’s favorite statistical claims, one he is likely to tout again at the upcoming State of the Union address.
The fallacy of touting this as a genuine accomplishment of the Trump administration rather than fortuitous timing has been noted by me and others on multiple occasions. Still, at the start of Black History Month, it’s useful to provide some facts about the African American labor force that you will probably not hear during the presidential address to Congress.
To begin with, it is true that the 2018 black unemployment rate was the lowest it has been since the Bureau of Labor Statistics began reporting it in 1972. But little, if any, credit for that belongs to the Trump administration. As the graph below clearly shows, the black unemployment rate had been steadily falling since 2011, well before Trump was sworn into office, and the rate of decline has not gained momentum since. Arguably, the decline of the black unemployment rate to its current level has more to do with the Fed’s decision to keep interest rates at or near zero for an extended period of time—decisions led by the two previous Federal Reserve chairpersons.
Unemployment rate of workers age 16 and older by race, 1995–2018
| Year | White | Black |
|---|---|---|
| 1994 | 4.84% | 11.54% |
| 1995 | 4.46% | 10.53% |
| 1996 | 4.22% | 10.59% |
| 1997 | 3.82% | 10.13% |
| 1998 | 3.45% | 8.95% |
| 1999 | 3.30% | 7.98% |
| 2000 | 3.14% | 7.59% |
| 2001 | 3.79% | 8.65% |
| 2002 | 4.73% | 10.23% |
| 2003 | 4.85% | 10.77% |
| 2004 | 4.49% | 10.39% |
| 2005 | 4.11% | 10.03% |
| 2006 | 3.84% | 8.97% |
| 2007 | 3.85% | 8.29% |
| 2008 | 4.75% | 10.11% |
| 2009 | 7.80% | 14.79% |
| 2010 | 8.01% | 15.92% |
| 2011 | 7.25% | 15.84% |
| 2012 | 6.58% | 13.95% |
| 2013 | 5.99% | 13.16% |
| 2014 | 4.88% | 11.51% |
| 2015 | 4.16% | 9.66% |
| 2016 | 3.96% | 8.50% |
| 2017 | 3.53% | 7.57% |
| 2018 | 3.19% | 6.57% |
Source: EPI analysis of BLS Current Population Survey microdata
However, even at an annual rate of 6.6 percent, the black unemployment rate was still more than double the white unemployment rate of 3.2 percent in 2018. In fact, the graph also shows that the last time the white unemployment rate was 6.6 percent was six years earlier in 2012, when the black unemployment rate was 14 percent. If you’re starting to see a pattern emerge, then the shortsightedness of Trump’s boasting about the black unemployment rate should also be apparent. The black unemployment rate has been about double the white unemployment rate for more than four decades, making this relationship more historically significant than any single unemployment rate. And, it is the durability of this gap that allows blind celebration of an unemployment rate that is higher than that of any other race or ethnicity reported by BLS, when the more appropriate response would be to focus on solutions for closing the gap.