Diary

Trade War Towers Over the President’s State of the Union Address

FILE- In this Jan. 30, 2018, file photo, a container ship waits to be unloaded at the Port of Oakland in Oakland, Calif. Economists project that the U.S. economy's rate of growth slowed in the last three months of 2017. On Wednesday, Feb. 28, 2017, the Commerce Department issues the second of three estimates of how the U.S. economy performed in the October-December quarter. (AP Photo/Ben Margot, File)

The crown jewel of President Trump’s 2020 platform is the economy—and he’ll be putting it on full display during his State of the Union address tonight. While there are a lot of economic achievements to choose from, the president will likely highlight the nation’s historically-low 3.5 percent unemployment rate, with nearly 160 million Americans working, and Wall Street’s record-breaking bull run, which were all due in part to his administration cutting a record-number of regulations and overhauling a bloated tax system to spur economic growth. And, proving his Art of the Deal chops, he successfully negotiated a number of trade deals last year.

But recent economic data and forecasts show darker clouds on the horizon—and they reveal a roadblock in the president’s path to a landslide reelection.

On the heels of reports that the GDP in 2019 rose at its lowest rate in three years, the Federal Reserve published a study showing that the trade war has backfired, placing the President’s own supporter base in the crossfire. The “unprecedented tariff increases,” the study says, did not boost manufacturing jobs, but instead led to job losses, pushing the blue-collar manufacturing industry into a sector-wide recession. The manufacturing sector has now shrunk for five months straight and the demand for American goods dropped sharply last month, leaving both businesses and workers in jeopardy.

Rust Belt states that supported President Trump during the 2016 election are paying the most in tariffs and shouldering much of the trade war’s consequences. Pennsylvania, for example, has an unemployment rate that is a whole point higher than the national average after it ended 2019 with nearly 6,000 fewer factory jobs and paid $1.3 billion in tariffs. Meanwhile, Michigan also has an unemployment rate that is higher than the national rate and lost 5,300 manufacturing jobs last year after having to pay close to $2 billion in tariffs. Both states had double-digit drops in exports, as China’s retaliatory tariffs made these state goods less competitive abroad.

The Midwest’s job losses are part of a nationwide manufacturing decline since the trade war began. Last month alone 12,000 Americans lost their manufacturing jobs when production reached its lowest level in a decade, marking 2019 as the second-weakest manufacturing performance in recent history. In total, the trade war has cost America 340,000 jobs and counting.

 

Tariffs, in the end, trickle down to consumers. The Congressional Budget Office found that consumer prices have risen, as companies have to raise prices to pay for the additional taxes on their products. Worse, the CBO report revealed that while prices are going up, the average household income plummeted by nearly $1,280. But companies would rather keep their prices the same as they were before the trade war. So, they filed over 51,345 tariff exemption requests to the federal government.

Only a handful of exemptions, however, were accepted. The “exclusion request review process is neither transparent nor objective,” according to the Commerce Department’s inspector general, who also said that some companies have had “improper influence” over the exemption process. For example, Apple had its ten exemption requests approved after CEO Tim Cook met with the president. Meanwhile, most American companies and manufacturers, particularly those in rural communities, don’t have a direct line to the White House and can’t get a single exemption, driving them to the verge of closing and costing them $46 billion collectively in additional taxes since the trade war began in 2018.

American companies, workers, and families are bearing the brunt of the trade war – not China. Left with no other choice, voters are looking to Democratic candidates who are promising to end the trade war. In nearly every poll, candidates, from Joe Biden to Michael Bloomberg, who promise to end the trade war are beating the president.

President Trump took the first step by negotiating a phase one deal with China – but the trade war is still raging on. The final deal should eliminate all tariffs, giving his base and voters what they want.

Jesse Grady has worked with the RNC, Trump Campaign, Texas GOP, and the NC GOP. He now lives in Baltimore and studies law at the University of Maryland.