While the Trump administration has claimed that the era of U.S. offshoring is “over,” the reality is that the United States has not begun to address the root causes of America’s growing trade deficits and the decline of American manufacturing. Decades of trade, currency, and tax policies that incentivized offshoring, combined with an utter failure to invest adequately in infrastructure and good jobs at home, have contributed to growing inequality and an eroding middle class.
President Trump’s erratic, ego-driven, and inconsistent trade policies have not achieved any measurable progress, despite the newly combative rhetoric. On top of that, COVID-19—and the administration’s mismanagement of the crisis—has wiped out much of the last decade’s job gains in U.S. manufacturing.
Unless steps are taken now—to reform our trade policy, to curb dollar overvaluation, to eliminate tax incentives for offshoring, and to rebuild the domestic economy—there won’t be a comeback.
As this policy report makes clear:
- Offshoring and the loss of manufacturing plants have continued under Trump, notwithstanding U.S. Trade Representative Robert Lighthizer’s claim that the administration’s trade policy is helping U.S. workers (Lighthizer 2020a).
- The strong and rising U.S. dollar is a major cause of the continuing growth of U.S. trade deficits.
- While manufacturing employment rose steadily between 2010 and 2019, the COVID-19 shutdown has wiped out more than half of the jobs gained in the past decade.
- The U.S. economy is in the midst of a historic collapse due to the uncontrolled coronavirus pandemic and recession.
- Restructuring and rebuilding the economy will require a coordinated and comprehensive strategic policy response that includes rebalancing of U.S. trade, as well as massive public investments in infrastructure, clean energy, training, R&D, and other industrial policies. These investments can create millions of skilled, high-wage jobs for non-college-educated workers in the U.S., who have been hard hit by the coronavirus downturn—especially Black, Latinx, and women workers—who have been left behind as manufacturing employment shrinks.
- Under current government procurement policies and trade rules, much of the public spending for infrastructure and clean energy systems would leak away to foreign providers, in the form of increased imports. Thus, new public investments should all include strong “Buy America” clauses.
- Joe Biden has recently proposed major investments in infrastructure, climate, and rebuilding manufacturing. These proposals could make a substantial contribution to meeting U.S. investment needs and generating a strong, sustainable, broadly shared recovery.
The Trump administration has not succeeded in reshoring manufacturing
In recent congressional testimony, U.S. Trade Representative Robert Lighthizer praised several companies that have scrapped offshoring efforts or have announced plans to move production to the United States, and he has further claimed that the “era of reflexive offshoring is over” (Lighthizer 2020b, 2020c). He also praised both the U.S.-Mexico-Canada Trade Agreement (USMCA)—which took effect July 1—and the current “Phase One” China trade deal. These are supposed to be signature accomplishments for the administration, contributing to a purported “blue-collar boom.”
It is important to note that the Trump administration has a habit of issuing press releases citing plans for major foreign investments in the U.S. that never materialize. In July 2017 Foxconn announced—to great fanfare from the White House–plans to invest $10 billion and bring “thousands of new American jobs” to Wisconsin and elsewhere in the United States (White House 2017). News reports indicate that Foxconn’s buildings in Wisconsin were still empty as of April 2020 (Dzieza and Patel 2020).1
But offshoring has in fact continued throughout this time, as reflected in changes in the total number of U.S. manufacturing plants, shown in Figure A. Overall, the U.S. has suffered a net loss of more than 91,000 manufacturing plants and nearly 5 million manufacturing jobs since 1997. Nearly 1,800 factories have disappeared during the Trump administration between 2016 and 2018 (BLS 2020; U.S. Census Bureau 2020a, 2020b). The U.S. has experienced a net loss of manufacturing plants (establishments) in every year from 1998 through 2018 (the most recent year for which data are available).
Nearly 5 million manufacturing jobs and more than 91,000 plants have been lost since 1997: Change in number of manufacturing establishments (actual), and change in manufacturing employment (thousands), 1997–2018
|Change in number of establishments (total of all years=91,403)||Change in employment, in thousands (total of all years=4,729,000)|
*Establishment estimates for 2017 and 2018 are from analysis of the U.S. Census Bureau County Business Patterns data for 2016–2018, compared with U.S. Census Bureau Business Dynamics Statistics data for 1997–2016.
Note: Each bar shows change since previous year.
Sources: Employment numbers: EPI analysis of Bureau of Labor Statistics (BLS) Current Employment Statistics establishment employment data. Establishment numbers: EPI analysis of U.S. Census Bureau Business Dynamics Statistics data for 1997–2016 and U.S. Census Bureau County Business Patterns data for 2016–2018.
Employment per plant has ebbed and flowed, increasing during recoveries and dropping much more sharply in downturns, as shown in Figure A. Massive job losses in just six years—during the 2001 recession and the China import surge of 2002–2004, and during the Great Recession of 2008–2009—account for more than all of the net loss of nearly 5 million manufacturing jobs in this period.
The loss of these jobs was particularly costly for women, Black, and Latinx workers, who were left behind as employment collapsed and many of the remaining manufacturing plants shifted to rural locations in right-to-work states in the West and South (Madland, Walter, and Eisenbrey 2012).
Here’s what the data actually show about the purported “blue-collar boom” under the Trump administration: The U.S. gained roughly 500,000 U.S. manufacturing jobs from 2016 to 2019. But these gains are exactly on par with gains across the entire economic recovery period from 2010 to 2019, during which 166,000 manufacturing jobs were gained each year, on average. The 2016–2019 gains did not represent an improvement over prior years in that decade, and even the decade’s overall gains had managed to restore only a fraction of the jobs lost in the prior decade.
And recent years’ manufacturing gains were abruptly wiped out by the COVID-19 crisis—with a staggering 740,000 manufacturing jobs lost this year, as shown in Figure B (BLS 2020). If President Trump wants to take credit for the job growth at the tail end of a decade of recovery from the Great Recession, then he must also own this collapse, thanks to his administration’s mismanagement of the pandemic—including a refusal to organize an effective national response (Scott 2020b). And while the June 2020 data show an upswing in manufacturing jobs, more recent jobs data indicate that the nascent and partial recovery in manufacturing is at risk due to recurrence of COVID-19 in states that have reopened, including many in the South and Western United States (Hannon and Kiernan 2020; WSJ Pro 2020; Bartash 2020).
Manufacturing employment is down 740,000 jobs since February 2020 amid the coronavirus crisis: U.S. manufacturing employment (thousands), January 2010–July 2020
|Date||Total employment, thousands of jobs|
Source: EPI analysis of Bureau of Labor Statistics (BLS) Current Employment Statistics (CES) data series [CES3000000001].
Contrary to popular myth, growing trade deficits, and not automation, are responsible for the vast bulk of manufacturing job and plant losses in the past two decades (Guilford 2018). Growing trade deficits with China between 2001 and 2018 (2.8 million manufacturing jobs lost) and the U.S. trade deficit with the Trans-Pacific Partnership countries in 2015 alone (1.1 million manufacturing jobs lost) account for more than three-fourths of the U.S. manufacturing jobs lost in the past 20 years (Scott and Mokhiber 2020; Scott and Glass 2016). This is confirmed by Susan Houseman’s extensive review of the research literature, “which finds that trade significantly contributed to the collapse of manufacturing employment in the 2000s, but finds little evidence of a causal link to automation” (Houseman 2018).
The rising dollar is responsible for growing trade deficits
U.S. manufacturing was struggling long before COVID-19. Starting in 2014, the U.S. dollar has appreciated in fits and starts, climbing nearly 23%, as shown in Figure C (Fed 2020b). More than half of that rise has come since the Trump tariffs were first imposed in March 2018. This stronger dollar keeps making U.S. exports more expensive and imports cheaper. Equally problematic, the 2017 Trump tax cuts on corporate profits incentivized offshoring for certain types of production while also raising after-tax profits. This has attracted more foreign capital to U.S. stock markets, spurring the dollar even higher. The dollar has also been driven higher during the coronavirus recession by “safe haven” effects, with foreign capital surging into the U.S.—as it does during most global downturns.
The real value of the U.S. dollar has risen 22.7% since July 2014: Real value of the U.S. dollar, January 2006 to July 2020 (indexed to January 2006)
|Date||Real Dollar Index, Goods & Services|
Note: Rates in currency units per U.S. dollar except as noted. Index January 2006=100, monthly, not seasonally adjusted.
Source: Author’s analysis of data from the Federal Reserve, Nominal/Real Indexes, [Foreign Exchange Rates - H.10] Real Broad Dollar Index—Monthly Index.
Unfortunately, the Trump administration has simply ignored the linkage between these policies and a rising U.S. trade deficit, despite the fact that as a candidate, Donald Trump promised to declare China a “currency manipulator” on “day one” of his administration (Talley 2016). While the Treasury did, finally, name China a currency manipulator last year, it was too little, too late (Scott 2019). China’s currency, the yuan (or RMB), has continued to fall relative to the U.S. dollar since March 2018, despite the inclusion of a “currency clause” in the Phase One U.S.–China trade deal (Fed 2020a). Notably, the agreement was neither a binding constraint on Chinese monetary policy nor a real commitment to action on the part of the U.S. Treasury.
Overvaluation of the dollar is one of the most important structural causes of growing U.S. trade deficits. In order to help rebalance U.S. trade flows, the dollar needs to fall 25–30% overall on a real trade-weighted basis, and more against the currencies of surplus countries and areas such as China, the European Union, Japan, and Korea (Scott 2019). The strength of the dollar was sustained by massive currency manipulation between 2000 and 2014 (Bergsten and Gagnon 2017), but since then large private capital inflows to U.S. financial markets have continued the trend.
There are several tools that can be used to address dollar overvaluation.2 Perhaps the most effective proposal to reduce and manage excessive private capital flows on a sustained basis is a bipartisan bill, the “Competitive Dollar for Jobs and Prosperity Act,” introduced last year by Senators Baldwin (D-Wis.) and Hawley (R-Mo.) (S.2357).3 Their legislation would impose a small tax, or “market access charge” (MAC), on all foreign capital inflows (Hansen 2017). Their proposal would direct the U.S. Federal Reserve Board of Governors to set this tax at a level needed to rebalance trade and capital flows, giving the Fed both a new mandate—to achieve balanced trade—and a new tool to achieve that goal. Millions of good, high-wage manufacturing jobs can be created by rebalancing trade flows, something that would contribute to recovery from the COVID-19 recession.
If Trump’s trade policy really encouraged reshoring, America’s trade balance would have improved in the past three years. But the U.S. trade deficit in manufactured goods rose significantly between 2016 and 2019, as shown in Figure D. In fact, the real U.S. trade deficit has increased in every year since 2016, reducing GDP growth by roughly one-quarter of one percent annually over the past three years (USITC 2020; BEA 2020).
The U.S. manufacturing trade deficit has been growing above trend since 2016: U.S. manufacturing imports, exports, and trade deficit, 1997–2019 (annual)
|Date||Mfg exports||Mfg imports||Mfg trade deficit (M−X)||Mfg trade deficit trend (M−X)|
Source: EPI analysis of data from U.S. International Trade Commission Trade DataWeb.
Furthermore, the strong dollar has also decimated farmers, and it is a much more significant driver of the decline in farm incomes than Trump’s China trade war. There is a single world price for commodity products like wheat and soybeans, as Dean Baker has noted (Baker 2018, 2019). If the dollar rises relative to those of our competitors, then the dollar price of U.S. farm products must fall. Thus, there is a strong, negative correlation between soybean prices, for example, and exchange rates, as shown in Figure E.
Exchange rates explain nearly 80% of the movement in soybean prices: U.S. soybean prices and the real value of the U.S. dollar, January 1997–May 2020
|Date||Real dollar index||Soybean price index|
Note: The Real Broad Dollar index (Goods only) was extrapolated to May 2020 using the percentage change Real Broad Dollar index (Goods and Services) for each corresponding month.
Source: Author’s analysis of Federal Reserve, Nominal/Real Indexes, [Foreign Exchange Rates - H.10] Real Broad Dollar Index—Monthly Index and Bureau of Labor Statistics (BLS) Producer Price Index (PPI) commodity price series data.
When the real (price-adjusted) dollar declines, as it did between 2002 and 2012, soybean prices increase. Grain and soybean prices started falling as soon as the dollar began to rise in 2014. Movements in the dollar alone explain nearly 80% of the change in soybean prices, with the rest having to do with changes in weather conditions, incomes, farm decisions (e.g., crop allocations), and other factors.
We need to realign the dollar to rebalance trade. Manufacturing and the farm sector will both benefit directly from dollar realignment. President Trump has utterly failed to address this core issue, despite his baseless and self-serving promises to address currency manipulation and rebuild manufacturing by getting “tough on trade.”
Trump’s trade deals have not helped U.S. workers
The USMCA—which was touted as a replacement for NAFTA—is unlikely to resolve longstanding U.S.–Mexico trade issues. America’s trade deficit with Mexico increased by more than 29% in 2019 alone (U.S. Census Bureau 2020c). And when it comes to important sectors like autos and auto parts, General Motors has been closing assembly plants in Ohio, Michigan, and Maryland while increasing its reliance on imports from Mexico (AP 2019; Samilton 2019; Mirabella 2019). In fact, GM has been ceding market share to foreign producers for decades, and has grown increasingly reliant on imports from Mexico and other countries. Meanwhile, market share has been captured by foreign producers. Recently, BMW, Mercedes/Infiniti, and Kia opened plants in Mexico—a missed opportunity to reshore production to the United States (Szczesny 2019; Mexico Now 2018a, 2018b). And the supplier networks for these plants will be built in Mexico, not the U.S.—further eroding America’s auto industry.
Offshoring to Mexico is also taking place in aerospace and other sectors, with aerospace exports from Mexico increasing 10% in 2019 (Krause 2020). While the USMCA significantly improves domestic labor protections in Mexico compared with the earlier version of NAFTA, its overall provisions are inadequate to stem these offshoring trends.
The Phase One China trade deal is a bust, too. China promised to increase purchases of U.S. goods and services by $200 billion over 2017 imports. But Beijing is unlikely to meet these targets (Craymer and DeBarros 2020). And the deal doesn’t even address China’s egregious, systematic labor rights violations.
Beijing has also strategically adjusted to the Trump tariffs. China is simply exporting more goods elsewhere, and the U.S. trade deficit with China’s trading partners rose rapidly in 2019. In fact, China’s overall trade surplus with the world climbed significantly in 2019 (Setser 2020a). China also reduced the value of its currency by 10.0% against the U.S. dollar since March 2018, helping to offset the tariffs (Fed 2020a).
The tariffs remain a “signature” element of the Trump trade agenda. And they’ve helped sectors like steel and aluminum (Scott 2018a, 2018b). But the president misses a key point: If you increase tariffs without taking steps to prevent the dollar’s appreciation, the overall benefits can be simply neutralized.
Trump’s tax policies have encouraged outsourcing
America’s trade problems have been exacerbated by mistakes and/or malfeasance in Trump’s tax policymaking. U.S. multinational corporations continually engage in massive, international tax avoidance—with some paying no U.S. income tax at all. The 2017 tax cut exacerbated this problem by creating a new, lower corporate tax rate for “global intangibles income.”4 The pharmaceuticals industry has since reaped major rewards and has moved plants to countries with the lowest possible corporate tax rate (Setser 2020b). As a result, the U.S. now has a massive trade deficit in pharmaceuticals, which exceeds the trade surplus in aerospace products, the strongest U.S. export industry. Leading suppliers of pharmaceutical imports—many produced by U.S. firms, such as Pfizer, which had no taxable U.S. income over the entire decade from 2007 to 2016 (Rice, Kitson, and Clemente 2017)—include Ireland, Germany, Switzerland, India, and China.
The U.S. trade deficit is likely to shrink during COVID-19 simply because of the decline in consumer income and spending. But unless steps are taken to address dollar overvaluation and the tax incentives that encourage offshoring, these deficits will simply reemerge when recovery occurs (Scott 2020a).
Manufacturing job loss was a key issue for voters in the 2016 election
Voters from manufacturing states have been hardest hit by growing trade deficits and failed trade and investment deals. In 2016, Donald Trump ran on a nationalist campaign platform, based in part on a critique of globalization that cited EPI research (Trump 2016). Hillary Clinton and Bernie Sanders have also cited EPI research on, for example, jobs lost due to growing trade deficits with China (Clinton 2007; Sanders 2020). Globalization is clearly an issue of bipartisan concern.
In 2016, voters from the top 25 manufacturing states, ranked by share of total employment in manufacturing, gave nearly 80% of their electoral votes to Donald Trump, as shown in Figure F, the manufacturing electoral heat map. Hillary Clinton prevailed in the bottom 25 manufacturing states, by a margin of 61% to 39%, but it was not enough to offset Trump’s advantage in the manufacturing states. However, Trump’s policies have failed to stop offshoring or the erosion of the U.S. manufacturing base.
In states where manufacturing composes a larger share of overall employment, Trump garnered more electoral votes in 2016
|State||Manufacturing employment share||Electoral votes||Electoral votes for Clinton||Electoral votes for Trump|
Note: Manufacturing data are for 2019.
Source: EPI analysis of Bureau of Labor Statistics Current Employment Statistics, State and Metro Area (BLS-CES/SAE) Employment, Hours and Earnings Data; and Politico, “2016 Presidential Election Results.”
The restoration of manufacturing in the United States will be essential to the COVID-19 economic recovery. It is time to consider a progressive alternative for rebuilding manufacturing. The components of such a plan are described in the following section.
The COVID-19 recovery will require major investments in infrastructure and clean energy
The coronavirus crisis has devastated the U.S. and global economies. Black, Latinx, and women workers have been hardest hit, and without special efforts made for low-income communities, they will be the last to recover (Gould 2020b). With the economy in freefall, the U.S. needs to engage in massive and widespread relief.
America also needs a plan for economic reconstruction in the wake of the COVID-19 pandemic, one that is specifically designed to address the needs of those hardest hit in the economy. Millions of jobs and small businesses have been lost in sectors such as retail trade, travel, tourism, and restaurants, and many will never come back. The economy must be restructured—new and better jobs are needed for displaced workers. Properly done, the required investments can create good jobs with excellent wages and benefits for Black, Latinx, and women workers who have suffered from racism or discrimination and economic inequality (Gould 2020a; Gould and Wilson 2020). Thus, any relief and rebuilding plan must address the following core issues.
The U.S. must continue to provide massive and widespread relief
Relief spending must be continued and expanded. The U.S. has recently encountered a Wile E. Coyote moment—it just ran off the edge of a cliff—with the expiration of an expanded unemployment compensation program that was giving 33 million workers a $600 weekly unemployment insurance boost (Shierholz 2020). The failure to renew this and other relief programs will cause a collapse in consumer spending and business investment, resulting in an economic tsunami that threatens to deepen the coronavirus recession into a depression in the fall, while potentially exacerbating the health crisis by pushing people to go back to work before it’s safe to do so (Bivens 2020b).
We need expanded relief for all workers in the next coronavirus bill, and we also need to add at least $1 trillion in federal aid for state and local governments, support for public health measures (testing, tracing, and isolation, with paid leave), unemployment, and continuing income supports for the tens of millions who are furloughed or unemployed and for businesses that are shuttered (Bivens 2020a). Without aid for state and local governments, in particular, 5.3 million jobs are at risk by the end of 2021, which threatens to further deepen the coronavirus recession (Bivens and Cooper 2020).
The U.S. must rebuild a sustainable, resilient, manufacturing-based economy
Even if the coronavirus pandemic is successfully controlled, we are likely to experience recurrent infections and hot spots (as has already occurred in the South and West) until vaccines and more effective treatments arrive. Meanwhile, massive effort is needed, starting today, to rebuild and restructure the economy in ways that will address the needs of Black, Latinx, and women workers.
Millions of low-wage service jobs are unlikely to return. As we rebuild our economy, these jobs can and should be replaced with higher-wage jobs in manufacturing and construction that provide excellent benefits and afford workers the right to organize and bargain collectively. Planning and organizing these rebuilding efforts—including design, permitting, and purchase of materials and rights-of-way—should begin now, so that funding, projects, and employment can flow in earnest once the pandemic has been brought under control.
There are three essential components of a sustainable U.S. economy
Looking forward, the three pillars of building a sustainable, resilient, manufacturing-based economy are: (1) rebalancing trade flows; (2) rebuilding U.S. infrastructure; and (3) supporting the transition to efficient and clean energy systems.5
In 2017, the American Society of Civil Engineers estimated in its Infrastructure Report Card that the United States needs $4.6 trillion in infrastructure spending over 10 years for sorely needed repairs and modernization (ASCE 2017). This exceeds planned spending by $2 trillion. Similarly, Robert Pollin at the University of Massachusetts-Amherst suggests that the U.S. needs to devote roughly two percent of GDP annually to increased energy efficiency and clean energy conversion, or roughly $400–$500 billion per year (Drollette 2019). Thus, for infrastructure and clean energy transition, the U.S. needs additional investments of $650–$750 billion per year in rebuilding the economy.
The U.S. goods trade deficit exceeded $860 billion in 2019. By rebalancing trade and expanding U.S. public investment as described above, we can increase overall demand for U.S. production by up to $1.5 trillion per year, directly stimulating the manufacturing and construction industries while rebuilding the economy. This could generate massive increases in overall demand for goods and services produced in the United States that would support and create more than 17 million good jobs.6 These steps alone would absorb more than half of the 33 million workers who were drawing unemployment benefits or have applied and are waiting for benefits as of August 1 (Shierholz 2020).
Joe Biden has recently proposed a $2 trillion initiative for clean energy and infrastructure (Glueck and Friedman 2020; Erickson 2020). He has also proposed investing $300 billion in manufacturing R&D and implementing policies designed to maximize the domestic content of infrastructure investments through “Buy America” policies (Goldmacher and Tankersley 2020). These proposals could make a substantial contribution to meeting U.S. investment needs and generating a strong, sustainable, broadly shared recovery.
The U.S. must rebalance trade flows
Realigning the dollar, as described above, could help to eliminate U.S. trade deficits and prevent the reemergence of larger trade gaps in the future. Rebalancing trade can also generate millions of good manufacturing jobs and prevent the offshoring of more manufacturing plants in the future.
We must revise government procurement policies and trade rules to ensure that public infrastructure investments actually benefit U.S. workers and the U.S. economy
Steps must be taken to ensure that public investments maximize domestic bang-for-the-buck—in terms of job creation and GDP support—in the states and cities where they are needed most, providing good jobs for those who have been excluded from the economy of the past. Under current trade rules, much of the public spending for infrastructure and clean energy systems would leak away to foreign providers, in the form of increased imports. Thus, these proposals should all include strong “Buy America” clauses in state and federal procurement policies. Doing so will require modification of or withdrawal from the World Trade Organization government procurement agreement (Miller & Chevalier 2020).
We must also implement supply-side policies to ensure jobs go to those U.S. workers who were left behind by the decline in manufacturing
An array of supply-side policies are also needed to ensure that these investments generate jobs where they are needed most, for women, Black, and Latinx workers here in the United States. These workers have been hurt by the decline of these industries, which generate good jobs with excellent benefits, especially for non-college-educated workers. Supply-side policies include:
- An end to tax policies that encourage firms to offshore production, including all tax preferences for foreign investment and production. The U.S. should consider implementing a system of sales factor apportionment to fairly tax the global profits of all foreign and domestic companies, based on their total sales in the United States, and to further discourage offshoring (Stumo 2016).
- Substantial investments in R&D, training, school-to-work transition, job creation programs, expanded extension,7 and other industrial policies, including expanded financing of small and medium-sized manufacturing firms. The U.S. should also support improvements in labor rights in all 50 states (Madland, Walter, and Eisenbrey 2012) and measures to include workers, banks, and other community stakeholders on corporate boards, to improve their performance in local economies.
- Aggressive but strategic use of anti-dumping and enhanced safeguard measures to prevent surges of primary commodity imports, especially in sectors subject to chronic excess capacity (but with no across-the-board tariffs). The coronavirus has worsened a global metals glut, in part because China, the top producer of aluminum and steel, has kept up production as demand fell (Tita 2020). Aggressive enforcement of trade laws will be needed to limit damage to domestic producers during the coronavirus recession.
Investments should be financed with public debt until the economic crisis has subsided
Last, infrastructure and clean energy transition investments should be financed, at least during the COVID-19 recovery, by increasing public debt—including heavy borrowing until long-term interest rates begin to rise well in excess of a 2% inflation target (Bivens 2019). Then, and only then, can these needed investments be paid for by taxing capital, starting with the wealthy and those who can afford to pay, and with user fees as necessary and appropriate (offset by income transfers to low-income families). It is important to note that rebalancing trade will generate new federal revenues (through increased incomes), along with new revenues from the taxes imposed on foreign capital inflows, as referenced above. These revenues could also be used to pay off public debt.
Conclusion: Progressives must reshape their approach to trade
The coronavirus crisis is causing unprecedented damage to the U.S. economy and to the lives of tens of millions of Americans. This crisis will change the national economy in untold ways. Life in America will never be the same. But “in the midst of every crisis, lies great opportunity.”8 The need to rebuild America has never been greater, and the time to rebuild is now.
For the past three decades, mainstream Democrats have tied their fates to the twin mantras of free trade and globalization, which have cost millions of jobs and many thousands of factories. Bill Clinton campaigned for and signed NAFTA in 1993. He also negotiated and signed the agreement that created the World Trade Organization in 1994. And he negotiated the agreement that resulted in China’s entry into the World Trade Organization in 2001. Barack Obama negotiated and campaigned for the failed Trans-Pacific Partnership agreement. It is time for progressives to own and reject these failed policies, and to build and campaign on a plan to develop a 21st-century New Deal for the domestic economy.
In 2016, Donald Trump campaigned against globalization and these failed trade deals—which have clearly hurt U.S. manufacturing. It worked. He captured nearly 80% of the electoral votes in the top 25 manufacturing states, as shown above. But he has since failed to deliver for working Americans. Now the wheels are coming off. It’s time for a meaningful rewrite of failed U.S. trade and economic policies—all urgently needed to revive the U.S. economy at a critical time.
The author thanks Thea Lee for comments, Krista Faries for editorial guidance, and Daniel Perez for research assistance.
1. For more on Foxconn’s history of announced intentions to invest in the U.S., see Frankel 2017.
2. See the “Fair Globalization and Balanced Trade” section of EPI’s Policy Agenda (EPI 2018).
4. Global intangibles income is “income earned by foreign affiliates of U.S. companies from assets such as patents, trademarks and copyrights” (TPC 2020).
5. See the “Climate Change” section of EPI’s Policy Agenda (EPI 2018).
6. Author’s calculations based on model in Scott and Glass 2016.
7. For example, through the U.S. Manufacturing Extension Partnership Program (Shapira 2001; NIST 2020).
8. This quote is frequently attributed to Albert Einstein, but the actual source cannot be verified.
American Society of Civil Engineers (ASCE). 2017. 2017 Infrastructure Report Card.
Associated Press (AP). 2019. “‘Gut-Wrenching’ Day as Production Ends at Ohio GM Assembly Plant.” NBC News, March 6, 2019.
Baker, Dean. 2018. “Farm Prices and the Dollar: Can’t the Washington Post Discuss the Relationship?” Beat the Press (Center for Economic Policy Research blog), June 3, 2018.
Baker, Dean. 2019. “Are New York Times Reporters Really Prohibited from Talking About Currency Values and Trade?” Beat the Press (Center for Economic Policy Research blog), April 28, 2019.
Bartash, Jeffry. 2020. “U.S. Manufacturers Expand in July for Third Straight Month, ISM Finds, but Executives Say Not All the Jobs Are Coming Back.” MarketWatch, August 3, 2020.
Bergsten, C. Fred, and Joseph E. Gagnon. 2017. Currency Conflict and Trade Policy: A New Strategy for the United States. Peterson Institute for International Economics, June 2017.
Bivens, Josh. 2019. Thinking Seriously About What ‘Fiscal Responsibility’ Should Mean: Full Employment and Reduced Inequality Are the Most Important Targets of Fiscal Policy. Economic Policy Institute, September 2019.
Bivens, Josh. 2020a. “As Economic Forecasts Worsen, up to $1 Trillion in Federal Aid to State and Local Governments Could Be Needed by the End of 2021.” Working Economics Blog (Economic Policy Institute), May 11, 2020.
Bivens, Josh. 2020b. “Cutting Off the $600 Boost to Unemployment Benefits Would Be Both Cruel and Bad Economics: New Personal Income Data Show Just How Steep the Coming Fiscal Cliff Will Be.” Working Economics Blog (Economic Policy Institute), June 26, 2020.
Bivens, Josh, and David Cooper. 2020. “Without Federal Aid to State and Local Governments, 5.3 Million Workers Will Likely Lose Their Jobs by the End of 2021.” Working Economics Blog (Economic Policy Institute), June 10, 2020.
Bureau of Economic Analysis (BEA). 2020. “National Data, National Income and Product Accounts, Table 1.1.2: Contributions to Percent Change in Real Gross Domestic Product (A)” (Excel data set). Last revised June 25, 2020. Downloaded June 2020.
Bureau of Labor Statistics (BLS). 2020. “Employment, Hours, and Earnings from the Current Employment Statistics – CES (National)” (Excel spreadsheets). Accessed June 29, 2020.
Bureau of Labor Statistics, Current Employment Statistics State and Metro Area Employment, Hours, and Earnings Data (BLS-CES/SAE). 2020. Public data series accessed through series reports. Accessed July 2020.
Bureau of Labor Statistics, Producer Price Index Data (BLS-PPI). 2020. Public data series accessed through PPI data [tables]. Accessed July 2020.
Clinton, Hillary. 2007. “Remarks on Economic Blueprint for the 21st Century.” The American Presidency Project, October 2007.
Craymer, Lucy, and Anthony DeBarros. 2020. “China Ramping Up Purchases of U.S. Farm Goods: As Phase One of Trade Deal Gets Under Way, Beijing Isn’t on Pace to Meet Targets for Purchases Overall.” Wall Street Journal, May 19, 2020.
Drollette, Dan. 2019. “We Need a Better Green New Deal—An Economist’s Take.” Bulletin of the Atomic Scientists, March 25, 2019.
Dzieza, Josh, and Nilay Patel. 2020. “Foxconn’s Buildings in Wisconsin Are Still Empty, One Year Later: The Company’s Promised Statement or Correction Never Arrived.” The Verge, April 12, 2020.
Economic Policy Institute (EPI). 2018. Economic Policy Institute Policy Agenda. December 2018.
Erickson, Bo. 2020. “Biden Unveils $2 Trillion Climate Plan.” CBS News, July 14, 2020.
Federal Reserve Board (Fed). 2020a. “Foreign Exchange Rates – H.10: Historical Rates for the Chinese Yuan Renminbi” (data table). Accessed June 29, 2020.
Federal Reserve Board (Fed). 2020b. “Foreign Exchange Rates – H.10: Real Broad Dollar Index – Monthly Index” (data table). Accessed June 29, 2020.
Frankel, Todd C. 2017. “How Foxconn’s Broken Pledges in Pennsylvania Cast Doubt on Trump’s Jobs Plan.” Washington Post, March 3, 2017.
Glueck, Katie, and Lisa Friedman. 2020. “Biden Announces $2 Trillion Climate Plan.” New York Times, July 14, 2020.
Goldmacher, Shane, and Jim Tankersley. 2020. “In ‘Buy American’ Speech, Biden Challenges Trump on the Economy.” New York Times, published July 9, 2020; updated July 31, 2020.
Gould, Elise. 2020a. State of Working America Wages 2019: A Story of Slow, Uneven, and Unequal Wage Growth over the Last 40 Years. Economic Policy Institute, February 2020.
Gould, Elise. 2020b. “While Welcome Gains, Job Losses Since February Still Total 19.6 Million: Now Is Not the Time to Stop Providing Relief.” Economic Indicators, Economic Policy Institute, June 5, 2020.
Gould, Elise, and Valerie Wilson. 2020. Black Workers Face Two of the Most Lethal Preexisting Conditions for Coronavirus—Racism and Economic Inequality. Economic Policy Institute, June 2020.
Guilford, Gwynn. 2018. “The Epic Mistake About Manufacturing That’s Cost Americans Millions of Jobs.” Quartz, May 3, 2018.
Hannon, Paul, and Paul Kiernan. 2020. “U.S. Economy Faces Long Recovery from Coronavirus Effects, Experts Say.” Wall Street Journal, June 1, 2020.
Hansen, John R. 2017. Why the Market Access Charge Is Necessary to Fix Trade Imbalances. Coalition for a Prosperous America, September 2017.
Houseman, Susan N. 2018. “Understanding the Decline of U.S. Manufacturing Employment.” Upjohn Institute Working Paper no. 18-287, June 1, 2018.
Krause, Lou. 2020. “Aerospace Manufacturing Is the Source of US $9.5 Million in Industrial Exports.” Prince Manufacturing blog, April 13, 2020.
Lighthizer, Robert E. 2020a. “How to Make Trade Work for Workers: Charting a Path Between Protectionism and Globalism.” Foreign Affairs, July/August 2020.
Lighthizer, Robert E. 2020b. “Testimony of Ambassador Robert E. Lighthizer, United States Trade Representative, House Committee on Ways and Means Hearing on the President’s 2020 Trade Policy Agenda.” June 17, 2020.
Lighthizer, Robert E. 2020c. “The Era of Offshoring U.S. Jobs Is Over: The Pandemic, and Trump’s Trade Policy, Are Accelerating a Trend to Bring Manufacturing Back to America.” New York Times, May 11, 2020.
Madland, David, Karla Walter, and Ross Eisenbrey. 2012. Right-to-Work 101: Why These Laws Hurt Our Economy, Our Society, and Our Democracy. Center for American Progress Action Fund, the American Worker Project, and the Economic Policy Institute, February 2012.
Mexico Now. 2018a. “KIA to Increase Production 40% at Its Mexican Plant This Year.” January 30, 2018.
Mexico Now. 2018b. “Report: Mercedes-Benz to Build Sedans, Crossovers at Mexican Plant.” February 13, 2018.
Miller & Chevalier. 2020. What Then? What a U.S. Withdrawal from the WTO GPA Could Mean for Government Contractors Worldwide (litigation alert). February 6, 2020.
Mirabella, Lorraine. 2019. “Closure of General Motors’ White Marsh Plant Is Official, Local Union Officials Told.” Baltimore Sun, October 18, 2019.
National Institute of Standards and Technology (NIST). 2020. “Connect with Your Local MEP Center” (web page). Accessed July 2020.
Politico. 2016. “2016 Presidential Election Results” (website). Updated December 13, 2016. Source: AP.
Rice, William, Kayla Kitson, and Frank Clemente. 2017. The Pharma Big 10: Price Gougers, Tax Dodgers. Americans for Tax Fairness, December 2017.
Samilton, Tracy. 2019. “GM’s Warren Transmission Plant Closes Friday, to Worker Dismay.” Michigan Radio, July 30, 2019.
Sanders, Bernie. 2020. “Bernie Sanders on China.” FeeltheBern.org. Accessed June 2020.
Scott, Robert E. 2018a. “Trade Remedies for Steel and Aluminum Were Long Overdue” (statement). Economic Policy Institute, March 1, 2018.
Scott, Robert E. 2018b. Aluminum Tariffs Have Led to a Strong Recovery in Employment, Production, and Investment in Primary Aluminum and Downstream Industries. Economic Policy Institute, December 2018.
Scott, Robert E. 2019. “Trade Wars and the Over-Valued Dollar.” The Hill, August 9, 2019.
Scott, Robert E. 2020a. “The Wheels Are Coming Off Trump’s Trade Policy.” The Hill, June 19. 2020.
Scott, Robert E. 2020b. “Why Is Trump Putting Critical Protective Equipment on Layaway at Walmart?” Working Economics Blog (Economic Policy Institute), April 3, 2020.
Scott, Robert E., and Elizabeth Glass. 2016. Trans-Pacific Partnership, Currency Manipulation, Trade and Jobs: U.S. Trade Deficit with TPP Countries Cost 2 Million Jobs in 2015, with Job Losses in Every State. Economic Policy Institute, March 2016.
Scott, Robert E., and Zane Mokhiber. 2020. Growing China Trade Deficit Cost 3.7 Million American Jobs Between 2001 and 2018: Jobs Lost in Every U.S. State and Congressional District. Economic Policy Institute, January 2020.
Setser, Brad. 2020a. “Five Points About U.S. Trade over the Last Thirty Years.” Follow the Money (Council on Foreign Relations blog), May 8, 2020.
Setser, Brad. 2020b. “The Irish Shock to U.S. Manufacturing?” Follow the Money (Council on Foreign Relations blog), May 15, 2020.
Shapira, Philip. 2001. “US Manufacturing Extension Partnerships: Technology Policy Reinvented?” Research Policy 30, no. 6 (June 2001): 977–992.
Shierholz, Heidi. 2020. “Unemployment Insurance Claims Remain Historically High: Congress Must Reinstate the Extra $600 Immediately.” Working Economics Blog (Economic Policy Institute), August 6, 2020.
Stumo, Michael. 2016. “The Progressive Tax Reform You’ve Never Heard Of: How Ending Profit Shifting Can Fix Corporate Tax Cheating and Satisfy Republicans.” American Prospect, October 27, 2016.
Szczesny, Joseph. 2019. “BMW Opens $1 Billion Plant in Mexico: Automaker Opens Site Despite Trump Administration Tariff Threats.” Detroit Bureau, June 10, 2019.
Talley, Ian. 2016. “Trump’s Vow to Target China’s Currency Could Be First Step to Trade War.” Wall Street Journal, November 15, 2016.
Tax Policy Center (TPC). 2020. “What Is Global Intangible Low-Tax Income and How Is It Taxed Under the TCJA?” In The Tax Policy Center’s Briefing Book: A Citizen’s Guide to the Fascinating (Though Often Complex) Elements of the Federal Tax System. Published 2018, updated May 2020.
Tita, Bob. 2020. “Coronavirus Epidemic Exacerbates Metals Glut: China, the Top Producer of Aluminum and Steel, Has Kept up Output as Demand Falls.” Wall Street Journal, March 8, 2020.
Trump, Donald. 2016. “Full Transcript: Donald Trump’s Jobs Plan Speech.” Politico, June 28, 2016.
U.S. Census Bureau. 2020a. “Business Dynamics Statistics (BDS): Updates and Legacy Tables” (Excel spreadsheets). Accessed June 1, 2020.
U.S. Census Bureau. 2020b. “County Business Patterns (CBP): CBP Tables” (Excel spreadsheets). Accessed June 1, 2020.
U.S. Census Bureau. 2020c. “2020: U.S. Trade in Goods with Mexico” (data table). Accessed June 2020.
U.S. International Trade Commission (USITC). 2020. USITC Interactive Tariff and Trade DataWeb [database]. Accessed June 2020.
White House. 2017. “President Trump Welcomes Foxconn to the White House for a Major Jobs Announcement” (press release). July 26, 2017.
WSJ Pro. 2020. “Fed’s Bostic Less Optimistic as Virus Spreads; Rosengren Says Main Street Program Could Step Up If Economy Slumps.” WSJ Pro Central Banking (Wall Street Journal newsletter), July 9, 2020.