Wilbur Ross’s comments and Trump administration trade policies offer few answers for growing, job-destroying China trade deficit
This morning, Commerce Secretary Wilbur Ross claimed that the coronavirus outbreak in China “will help accelerate the return of jobs to North America.” This comment is not only cruel and inhumane, but it’s also a testament to just how little the Trump administration understands about America’s trade problems and how to solve them. Even the administration’s less off-the-cuff plans for rebuilding U.S. manufacturing have little chance of working. For example, as I noted previously, President Trump’s “phase one” trade deal with China is unlikely to significantly reduce the massive U.S. job losses that have resulted from growing U.S. trade deficits with China.
A new EPI analysis shows that growing trade deficits with China cost 3.7 million U.S. jobs between 2001 and 2018, including 700,000 jobs lost in the first two years of the Trump administration. Job losses occurred in all 50 states, every congressional district, and every industry. Manufacturing was hit the hardest, with 2.8 million jobs lost. Given this toll and the Trump administration’s rhetoric, you’d think they’d look for real solutions. Instead, Trump appears desperate to sign his deal, any deal, so that he can claim progress on reducing trade deficits. But he is shortsighted on trade because his arrangement with Beijing ignores at least two key problems. First, it assumes that China will suddenly obey trade rules and commitments it has never previously respected. And second, it limits Washington’s ability to respond to the currency misalignment currently hampering U.S. exporters.
America’s growing trade deficit has been driven by China’s history of currency manipulation and by private investors bidding up the value of the U.S. dollar. A rising dollar makes imports cheaper in the U.S. market and American-made goods more expensive for overseas consumers. However, the Trump administration’s trade deal with China maintains an extremely unfavorable exchange rate and fails to address the key structural concerns responsible for this long-term trade imbalance, including huge subsidies and massive excess capacity across a wide range of industries. His China deal is nothing more than a gift to Wall Street and Beijing.
Ross’s comments about the supposed benefit of the coronavirus epidemic are a sad illustration of the administration’s willingness to grasp at straws. A pandemic is no substitute for real and significant policies to reduce the China trade deficit and rebuild U.S. manufacturing. A fundamental reform of the U.S.–China trade relationship is overdue. Washington must address the structural causes of an imbalanced and unfair trading relationship with China, including currency realignment, government subsidies for key industries, and Beijing’s strategic use of state-owned enterprises to dominate global trade and investment.