The 2024 US presidential election has another nine months to play out, and predictions are a mug’s game at this point. But here’s some evidence of why Donald Trump might perform better than you might expect, if not win.
A recent working paper from the US National Bureau of Economic Research explored the intriguing issue of whether then-president Trump’s tariff wars, especially against China, delivered any benefits to the sectors they were intended to assist. The paper focused on economic impacts in the sectors Trump claimed he wanted to protect, and on agriculture, which was hit hard by retaliatory tariffs from other countries.
Trump’s tariffs didn’t work:
… import tariffs do not appear to increase employment in manufacturing (the intended beneficiary sector); rather, their positive effects are confined to the service sector, particularly business services — though this effect is imprecisely estimated. Second, retaliatory tariffs appear to reduce employment in crop production (their primary target sector), as well as transportation and warehousing, business services, and other services.
Meaning, the net result was fewer American jobs. Why? Partly because US importers might have switched from Chinese-sourced imports to other imports. And any job gains from the tariffs might have been offset by job losses from areas where higher prices resulting from the tariffs cut employment.
To help the agricultural sector affected by retaliatory tariffs, Trump resorted to another protectionist device: agricultural subsidies. They only offset a tiny fraction of the jobs lost as a result of other countries’ tariffs.
None of this is surprising. Tariffs, like all forms of protectionism, are the equivalent of punching yourself in the face because another country is doing the same thing. They don’t even force importers or foreign producers to pay more; it’s your consumers and businesses that end up doing that. Trump caused a trade war and wasted taxpayer money in order to cause, in broad terms, no change in American employment — just as everyone knew would happen. It’s a blatant example of the kind of incompetence that characterised his administration.
This latest study is of a piece with an extensive literature detailing how economically damaging Trump’s trade war was to the broader US economy, employment and even to the trade balance it was designed to improve. The studies range from the self-interested (the China trade lobby), to centrist think tanks, business-friendly think tanks, free trade think tanks, the business media, and The Wall Street Journal, to name a few.
But here’s the additional part of the study that should make for a dispiriting read: the tariffs (and subsidies), despite their negligible and harmful effects, increased support for Trump and the Republicans:
The tariff war was evidently successful in shifting voter identification away from the Democratic Party. Did it affect voting? … import tariff exposure significantly increased support for the Republican candidate … import tariffs raised president Trump’s two-party vote share by +0.67%. Retaliatory tariffs had a modest and statistically insignificant negative effect on the Republican vote, while farm subsidies had a weakly positive effect.
Why? One reason might be that Trump constantly lied about the non-existent benefits of the tariffs, including claiming that any manufacturing expansion at the time was because of him. Or it could be that voters didn’t really care if there were no benefits from the tariffs — they liked Trump trying anyway.
In other words, being incompetent doesn’t matter that much for many voters. What’s more important is tribalism: being prepared to signal that you will back your own even if it’s harmful and costs jobs. It’s also possible that the very fact that large numbers of experts, academics and corporations warned that Trump’s tariffs were a bad idea legitimised them in the minds of voters, given the antipathy toward free markets and globalisation.
It’s not a message lost on the Biden administration, which retained the bulk of Trump’s tariffs and implemented its own colossal industry subsidy program to onshore complex manufacturing to undermine China, boost renewables investment and rebuild US manufacturing. Biden is effectively trying to do something similar to Trump, but is putting more emphasis on a less directly damaging mechanism (subsidies) and linking it to high-tech manufacturing and renewables rather than standard manufacturing.
Biden’s challenge is to tap into the same tribalism — something Trump is an all-time master at — for programs that are aimed at achieving the same thing, just in a slightly less self-destructive way. It boils down not to competence or governing well, but shaping whether voters feel you’re on their side, even if you’re costing them their jobs.
