Trump’s trade war was bad for rural economies, good for his popularity, study finds
President Trump's trade war with China didn't help the economies of rural America. It did, however, make Trump more popular in those places.
Why it matters: The finding, from a fascinating new paper, suggests that the politics of China tariffs is much better than the economics.
- There was no direct employment boost from the policies in 2018 and 2019, but the moves still redounded to Trump's political benefit in areas most impacted by the tariffs, including in the Midwest and parts of the South.
- It's a recipe for further trade tensions between the globe's top economic superpowers should Trump retake office. And it comes as Trump barrels toward winning the Republican nomination to seek a return to the White House — while threatening to jack up tariffs on China further if reelected.
Details: The new working paper from David Autor, Anne Beck, David Dorn and Gordon H. Hanson builds on their previous work that showed just how damaging the China Shock in the 1990s and 2000s was for local economies exposed to trade with China.
- The new paper finds that the tariffs imposed on Chinese imports had no material employment impact in the period covered by the paper (through December 2019).
- But the paper's authors find that retaliatory measures imposed by China "had a consistent and significant negative employment impact" in these regions that was only slightly offset by the aid sent to farmers.
- Those measures reduced employment in crop production, transportation and warehousing — among other sectors.
Yes, but: "Although the goal of bringing back jobs to the heartland remained elusive, voters in regions that had borne the economic brunt of Chinese import competition in the 1990s and 2000s were particularly likely to reward the Trump government for its tariff policy," they write.
What they're saying: The results of the study suggest Trump would have a "political rationale" to continue aggressive trade policies, Dorn, an economics professor at the University of Zurich, tells Axios.
- "If it is the case that tough tariff policies are sufficiently popular with the voter base, the government might really [be] tempted to make use of that measure — even if it is not a good economic policy," Dorn said.
What's next: Over the weekend, Trump confirmed previous reporting that said he would impose at least 60% tariffs on Chinese imports.
- "[M]aybe it's going to be more than that," Trump told Fox Business in an interview that aired Sunday.