Opinion
Trump’s plan to bring back jobs by isolating the US won’t work—but it will start a trade war
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Regardless of its actual effectiveness in bringing back manufacturing jobs to the US, any decision by Trump to raise tariffs or introduce new quotas will hurt the interests of other stakeholders, both at home and abroad.
By Gian Luca Clementi
Throughout his long electoral campaign, US president-elect Donald Trump promised that he would bring back millions of American manufacturing jobs ostensibly lost to the forces of globalization. Trump told his supporters he would do so by curtailing trade and offshoring the old fashioned way, i.e. by reneging on international treaties and coercing US-based companies into shutting down foreign operations to the benefit of domestics plants. During campaign stops, the Trans-Pacific Partnership (TPP) free-trade deal was a constant. But will his plan actually work?
Regardless of its actual effectiveness in bringing back manufacturing jobs to the US, any decision by Trump to raise tariffs or introduce new quotas will hurt the interests of other stakeholders, both at home and abroad. And you don’t need a background in economics to understand why. Instead, one must only look back in time, to 2002, when president George W. Bush attempted to shield the US steel industry from foreign competition by imposing tariffs up to 30% on steel imports.
The measure was strongly opposed by domestic industries that make use of steel, many of which were concerned that higher input prices would make a dent in their profits. Unsurprisingly, the most vocal dissent came from a sector dear to the current president-elect—the construction industry. The tariff also enraged countless foreign governments, including members of the European Union and Japan, who sought and easily won support from the World Trade Organization. The WTO’s dispute resolution process led to a ruling that unequivocally demanded that the United States cease and desist. President Bush had no choice but to comply, and by 2003 the steel tariff was history.
Read the full article as published in Quartz.
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Gian Luca Clementi is an Associate Professor of Economics
Regardless of its actual effectiveness in bringing back manufacturing jobs to the US, any decision by Trump to raise tariffs or introduce new quotas will hurt the interests of other stakeholders, both at home and abroad. And you don’t need a background in economics to understand why. Instead, one must only look back in time, to 2002, when president George W. Bush attempted to shield the US steel industry from foreign competition by imposing tariffs up to 30% on steel imports.
The measure was strongly opposed by domestic industries that make use of steel, many of which were concerned that higher input prices would make a dent in their profits. Unsurprisingly, the most vocal dissent came from a sector dear to the current president-elect—the construction industry. The tariff also enraged countless foreign governments, including members of the European Union and Japan, who sought and easily won support from the World Trade Organization. The WTO’s dispute resolution process led to a ruling that unequivocally demanded that the United States cease and desist. President Bush had no choice but to comply, and by 2003 the steel tariff was history.
Read the full article as published in Quartz.
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Gian Luca Clementi is an Associate Professor of Economics