The likely presidential nominees will undoubtedly debate each other about trade this election — especially since Donald Trump has denounced free trade and Hillary Clinton has shifted her position on it.
Indeed, trade is becoming an increasingly contentious topic. In the US “anti-trade sentiment is certainly rising, particularly in key swing states in the industrial midwest,” Yahoo political consultant Brian Goldsmith recently told Yahoo Finance.
That anti-trade attitude marks a big shift, he said: “For generations now, economists have said trade is an absolute positive for the economy. Some studies have begun to emerge that show ... it’s more of a double-edged sword.”
Since the North American Free Trade Agreement (NAFTA) passed in 1993, the US economy has added about 30 million jobs, public-policy professor Guian McKee wrote in the Washington Post. That’s compared to about 680,000 US jobs that NAFTA eliminated.
But the benefits of trade, Goldsmith explained, tend to be very widely distributed and almost invisible. Meanwhile, the costs like plant shutdowns and eliminated jobs are more targeted and visible. Plus, two recent studies cited by The New York Times have shown that trade with China has had a significant negative effect on the US economy.
Trump’s anti-trade view
Trump has consistently said foreign countries are “killing us on trade.” He’s asserted that trade is a zero-sum game, meaning the US is “losing” if it imports more than it exports (a view many economists disagree with).
“This has been consistent for Trump for 30 year now: he believes that trade deals are killing this country; he believes politicians have made horrible deals that hurt workers; he believes that China has engaged in the greatest theft in terms of US manufacturing and blue collar jobs,” Goldsmith said. “So his policy is to go after both companies that move jobs and plants overseas as well as countries that promote different policies.”
Trump has proposed a 35% tariff against Mexico and a 45% tariff against Chinese goods. A model of Trump's proposals, prepared by Moody's Analytics, found the US would fall into recession if Trump managed to impose these tariffs and unravel NAFTA.
Hillary’s shifting stance
Clinton’s ideology is more trade-friendly than Donald Trump’s, notes Goldsmith. But, he said, some of her viewpoints have shifted in recent years in response “to a different political environment.”
Of course, it’s not unprecedented for a presidential candidate to change positions after winning a nomination, Jan Hatzius and his team at Goldman Sachs pointed out in a recent note. Hatzius noted that Bill Clinton opposed NAFTA during his campaign but then approved it; George W. Bush ran on a free trade agenda but imposed tariffs on steel and textile imports in office; and Obama opposed the US-Korea trade agreement before signing a modified version into law.
“It would not be surprising if the next president also shifts policy positions once in office, either due to political realities … or a change in views,” Hatzius wrote, noting the president has more authority over trade than other issues.
He noted: “On trade, for example, the President has significant influence over decisions involving protective duties in response to complaints brought by domestic industries, and could in theory withdraw from existing trade agreements without Congressional approval.”