Economic Analysis Shows Donald Trump’s China Crackdown Would Create Millions of American Jobs

Spencer Platt/Getty Images
Spencer Platt/Getty Images

Thursday night marked the sixth consecutive presidential debate in which Sen. Marco Rubio was not asked about President Obama’s Trans-Pacific Partnership agreement, which Rubio has supported so strongly that he claimed it would be a “pillar” of his presidency.

However, the debate did highlight a distinction between GOP frontrunner Donald Trump and the rest of the GOP field on trade. As Trump called for cracking down on Chinese currency manipulation, other candidates—most notably, Marco Rubio—argued against Trump’s corrective measures.

As Trump explained: “China is ripping us on trade. They’re devaluing their currency and they’re killing our companies… They send their goods and we don’t tax it—they do whatever they want to do… [But] when we do business with China, they tax us… I’m totally open to a tariff. If they don’t treat us fairly, hey, their whole trade is tariffed… they’re sucking us dry.”

Economic analysis confirms that Trump is correct. For instance, in a 2014 report from the Economic Policy Institute, Robert Scott writes, if the president were to “initiate policies that would make currency manipulation costly and/or futile”:

These policies could lead to exchange rate movements that would create 2.3 million to 5.8 million jobs over the next three years by ending currency manipulation by a group of about 20 countries, with China as the linchpin. These actions would create jobs in every state and in most or all congressional districts. They would boost GDP, boost jobs and reduce unemployment, and actually reduce the federal deficit by spurring economic growth—all without direct budget costs. No other policies could achieve this economic trifecta.

The way currency manipulation works is a foreign competitor, such as China, artificially lowers the price of its currency in a market manipulation in violation of trade rules in order to dump foreign goods in U.S. markets. When foreign competitors dump these cheap goods in American markets—often times targeting specific industries—American producers can be quickly put out of business forever, and the employees who work at those factories, in turn, will find themselves out of work as well.

As Sen. Jeff Sessions pointed out in 2011, when he and a bipartisan group of Senators introduced the Currency Exchange Rate Oversight Reform Act of 2011: “For years, China has been undervaluing its currency, which unfairly subsidizes its exports and puts American manufacturers out of business. The Alliance for American Manufacturing estimates that 2.8 million American jobs were lost to China between 2001 and 2010.”

In sharp contrast to Trump’s position on cracking down on currency manipulation, Marco Rubio has opposed such measures—and even voted down an amendment spearheaded by Ohio Republican Rob Portman to crack down on currency manipulation during push to pass fast-track trade authority, which Rubio supported.

At Thursday night’s debate, Rubio reiterated that he did not wish to address China’s cheating through corrective actions:

I think we need to be very careful with tariffs, and here’s why: China doesn’t pay the tariff, the buyer pays the tariff. If you send a tie or a shirt made in China into the United States and an American goes to buy it at the store and there’s a tariff on it, it gets passed on in the price to price to the consumer.

Moderator Neil Cavuto jumped in quickly to back up Sen. Rubio. “He [Rubio] is right,” Cavuto interjected. “If you put a tariff on a good, it’s Americans who pay.”

However, trade experts such as former Nucor Steel Chairman Daniel DiMicco have described the position articulated by Rubio and Cavuto as “unilateral trade disarmament and enablement of foreign mercantilism.”

Indeed, in 2011, Mitt Romney warned against such “trade surrender,” declaring, “I will label China as it is, a currency manipulator… and they will recognize that if they cheat, there is a price to pay… we can’t have trade surrender.”

As one GOP aide explained to Breitbart News, “If one adopts the view that penalizing a foreign producer passes on higher prices to consumers and that thus no penalties to enforce trade rules can be enacted, then one has adopted the view of ‘unilateral trade disarmament.'”

The aide continued, explaining that, under a trade surrender policy:

Anything goes, any company in America can have its doors closed any time any foreign competitor so decides. The accordant costs in terms of joblessness, lower wages, and community disintegration vastly outweigh any comparatively minor costs associated with enforcing a fair market where everyone plays by the same standardized set of rules. (Much in the same way whatever costs are associated with enforcing intellectual property rights pale in comparison to the costs, economic and social, of not enforcing intellectual property rights.) Again, if the rules are not enforced, then there are no rules at all – and the result is the demise of domestic manufacturing. So the question becomes: do we want domestic manufacturing, or not?

Indeed, this reality is playing out in Alabama right now where domestic products of paper are facing job loss as a result of foreign cheating and product dumping. In fact, the situation grows so dire that on Thursday, Sen. Jeff Sessions testified on behalf of Alabama’s worker in front of the International Trade Commission to demand their jobs be saved by instituting an anti-dumping/countervailing duty.

As Sessions explained in his testimony:

Each of these jobs is critical. We cannot stand to lose any more to unfair competitors… These plants specifically benefit struggling minority populations, as they provide a paycheck for those who would likely otherwise be without work… These are good jobs. The plants are safe and provide good healthcare and retirement benefits… While the competitors are vigorous, the industry can survive if the competition is fair and restricted by natural market forces. Unfortunately, the evidence indicates that unfair trade is occurring. For rural America, such mercantilism cannot be allowed to continue. If foreign companies are not forced to correct egregious practices, the result will be clear: our foreign competitors will continue to export their unemployment to the United States, with devastating effects on the American middle class.

Sessions has previously praised Trump for his strong leadership on the trade issue and said that no one can be the GOP nominee who doesn’t stand up for American workers on trade and end the trade surrender: “The winning candidate in 2016 will need to promote a trade and immigration platform that defends the legitimate interests of U.S. workers.”

Trump’s distinction from the GOP field on the critical issue of trade perhaps underscores his populist appeal among working-class Americans. President of the Steel Workers Union, Leo Gerard recently wrote a piece in which he cited the study of two Princeton economists demonstrating high death rates among “white, middle-aged Americans with high school diplomas or less.”

Gerard writes:

Americans who once earned family-supporting wages working in factories, foundries and mills across this country began destroying themselves at a shocking rate five years after implementation of the North American Free Trade Agreement (NAFTA)… Unemployed, desperate and despairing, these once-middle-class workers are killing themselves at unconscionable rates with guns, heroin and alcohol-induced cirrhosis… The cause of the self-slaughter, the researchers suggested, is financial strain. Bread winners couldn’t pay their bills and couldn’t foresee a future when they could. That is because jobs in manufacturing and construction – jobs that had provided middle-class incomes for workers without college degrees for decades – disappeared.

Gerard explains, “To such workers, the TPP would mean more tragedy, more death. The opposite is true for CEOs, shareholders and Wall Street financiers. To them, the TPP would mean even more luxury, more wealth. Trade schemes like the TPP further rig the economy in favor of the already-rich and against the hard-working rest.”


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