Donald Trump’s trade wars flopped.
The former president promised to boost American manufacturing through import tariffs and other protectionist measures, and it didn’t work. Yet the voters Trump was appealing to rewarded him anyway, according to a new study by prominent trade economists. That may explain why Trump now says he’ll intensify his trade wars if elected to a second term.
Economists bristle at the popular appeal of tariffs and other barriers to trade, which might sound like they protect American jobs but generally depress growth and raise costs. Trump disregarded such concerns as president, imposing new tariffs of up to 25% on about half of all Chinese imports to the United States. President Joe Biden left those in place after he took office in 2021, probably because repealing them could have made him look "soft on China."
Trump says he’ll add a new 60% tariff to all Chinese imports if he wins a second term. That would be economic folly, but it might have a political payoff — and a new analysis of Trump’s first trade war helps explain why. The study, by economists David Autor, Anne Beck, David Dorn, and Gordon Hanson, found that Trump’s China tariffs did more harm than good to the US economy. Yet they boosted political support for Trump in key parts of the country. Whether through Trump’s hucksterism or some other machination, voters seemingly embraced a policy that helped nobody and hurt some.
Trump’s principal beef on trade is the large US deficit in goods with China.
We buy much more of their stuff than they buy of ours. Economists generally say trade deficits aren’t a problem, as long as the domestic economy is innovative and growing. But Trump insisted on tariffs to raise the cost of Chinese imports, which he said would spur more domestic production and create new American jobs. In 2018 and 2019, he imposed tariffs ranging from 7.5% to 25% on about half of all Chinese imports, or about $360 billion worth of products.
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China retaliated with tariffs on imports from the United States, targeting agricultural products such as pork, soybeans, and cotton. China stopped buying some American products altogether, causing the US farm sector billions in annual losses. To help offset that, Trump set up a bailout fund for farmers hurt by the trade war.
All of that accomplished nothing and arguably worse than nothing.
The US trade deficit with China has declined from $379 billion in 2017, before Trump launched his trade war, to $279 billion in 2023. But the US trade deficit with other nations, such as Vietnam and Mexico, has soared, largely because Chinese producers began routing their products through third-party nations not subject to the tariffs. The nation’s trade deficit in goods with the whole world hit nearly $1.1 trillion in 2023, 34% more than in 2017.
To figure out whether the Trump tariffs boosted American output or employment, the Autor analysis isolated regions and sectors, such as manufacturing in the Midwest, which should have benefited from the Trump tariffs. They didn’t. The study has three conclusions: First, the Trump tariffs produced no boost in manufacturing employment. Second, China’s retaliatory tariffs reduced US agricultural employment. Third, Trump’s farm bailout helped offset some, but not all, of the job losses in agriculture.
A simple way of visualizing this outcome, or non-outcome, is to simply look at manufacturing employment during Trump’s presidency. It rose nicely during his first two years in office, but plateaued and then dipped in 2019, when the full force of the Trump tariffs went into effect. That happened well before the COVID pandemic arrived in 2020 and caused a short but deep recession.
Many other studies have reached similar conclusions.
The Tax Foundation, for instance, finds that Trump’s tariffs lowered US employment by 166,000 US jobs, with retaliatory tariffs killing another 29,000. The higher taxes paid by importers, meanwhile, amount to $74 billion in increased government revenue over a decade. Contrary to Trump’s insistence, however, it’s not China paying those higher taxes. It’s American firms that import the products, pay the tax and pass the higher costs onto consumers.
The tariffs worked to Trump’s advantage anyway.
The Autor study found that in local economies where the tariffs were supposed to help (but didn’t), Trump’s 2020 vote share rose by 0.67% compared with what it would have been absent the tariffs.
“The trade war appears to have been successful in strengthening support for the Republican party,” the study concludes. “Residents of tariff-protected locations became less likely to identify as Democrats and more likely to vote for President Trump. Voters appear to have responded favorably to the extension of tariff protections to local industries despite their economic cost.”
Trump obviously lost in 2020, but a vote swing of two-thirds of a percentage point can be bigger than it sounds. In 2020, Biden won Arizona, Georgia, and Wisconsin by smaller margins than that. If Trump won those three states, the electoral college vote would have been a 269-269 tie, and the House of Representatives would have decided the outcome, probably in favor of Trump. Many forecasters think this year’s race will be just as close as it was in 2020.
The Autor study proposes two possible reasons Trump gained politically from tariffs that didn’t really help anybody. The first is that “voters were misinformed about the employment impacts of the trade war.” Trump certainly did his best to misinform voters. He called the two-way tariff escalation an “amazing deal” and a “momentous step” and repeatedly bragged about a manufacturing resurgence that never happened.
Voters may also have appreciated Trump’s effort to help them, even if it didn’t work.
You could regard that possibility in two ways. One, at least Trump made an earnest effort to help. Or, Trump made a deliberate and cynical show of trying to help, knowing it wouldn’t matter. Sometimes, telling voters what they want to hear might be enough.
Rick Newman is a senior columnist for Yahoo Finance. Follow him on Twitter at @rickjnewman.
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