Manufacturing Data Disproves Donald Trump’s Trade Argument
Real economic data completely refutes Donald Trump’s argument that increasing tariffs will increase the number of American jobs by raising the level of manufacturing in the United States. Disturbingly the actual numbers show us that US factory output has doubled since 1984, but employment in manufacturing has fallen by a third.
The output of durable goods from American factories actually hit an all-time high in 2015, Market Watch columnist Rex Nutting pointed out. Statistics from the Federal Reserve’s Industrial Production and Capacity Report also indicate that production of durable goods in the United States is three times what it was in 1980.
Despite the claims of protectionists such as Donald Trump and Thomas Frank, American manufacturing is actually booming right now. Here are some real statistics that refute many of their claims:
- The production of durable goods in the United States hit an all-time high in 2015.
- The amount of goods manufactured in the United States came within three percentage points of breaking its all-time high set in 2007.
- Manufacturing is still the largest component of the US economy; accounting for 36% of the gross domestic product in 2015. More than twice that of any other sector.
- Manufacturers added $6.2 trillion to the GDP in 2015.
- The US is still the second largest manufacturing nation in the world after China.
- Manufacturing drives research and development. Manufacturers account for around 77% of the R&D spending in America’s private sector.
Okay there is a problem with the new American manufacturing boom which partially explains Donald Trump’s popularity with working-class voters. The US lost around five million manufacturing jobs between 2000 and 2015.
America’s factories are producing more goods with fewer people. There were around 17.3 million factory workers at the turn of the 21st Century and 12.3 million such employees 15 years later.
American Manufacturing could Once Again Dominate the World
These figures indicate that US manufacturing has become more efficient and productive than ever before at the expense of workers. Only around 8.7% of Americans work in manufacturing, but their work generates 36% of the GDP.
The most obvious reason for this incredible efficiency is technology, in particular the increasing use of robots in factories. US companies purchased 26,015 robots in 2013, The Financial Times reported. One of the major users of robots is the auto industry, which enjoyed a record year in 2015 yet employed 30% fewer workers than in the 1980s, according to the American Enterprise Institute.
It looks as if US manufacturing has become incredibly efficient thanks to technology. One has to wonder if these levels of efficiency persist; will the USA again become the world’s top manufacturing power? That could happen if all US manufacturers follow the auto industry’s lead.
America could soon be in a position to dominate much of the world’s economy as it did after World War II because of this new automated industry. The problem is that the new economy will not create tens of millions of high-paying factory jobs like the postwar economy did. The US economy seems to be greater than ever but a lot of Americans are not profiting from it.
Sorry Donald, the Jobs are Not Coming Back
Economists’ estimates show us that the number of jobs lost to automation and other factors might exceed those lost to imports. A group of economists estimated that one million US jobs have been lost to Chinese imports in the last 15 years, The Economist reported. Yet five million US factory jobs vanished during that time frame.
These figures show that Donald Trump’s trade policies; which include 45% tariffs on all Chinese made goods and 35% tariffs on some Mexican imports, might not lead to increased employment. The actual numbers indicate that US manufacturers might be able to ramp up production to make up for lost imports without adding significant numbers of workers.
Around 45% of the tasks done by workers could be automated by using existing technologies, the McKinsey consulting firm noted. This means Donald’s policies could actually speed up automation and job loss.
Perhaps Trump should listen to American Enterprise Institute columnist and blogger James Pethokoukis, who suggested that the developer “should shut up about China and start railing against robots” in a recent column for The Week. If Trump does not listen to Pethokoukis, I am sure some other demagogue will.
The financial data indicates that the real causes of the massive job and income losses that are hollowing out many American communities have little or nothing to do with trade. Technology has made the United States an economic powerhouse that could dominate the world with high levels of manufacturing production that provide little or no benefit to the average American.
The actual economic data shows us that limiting trade is not the solution to problems like income inequality and wage stagnation. We need to look at other policies such as increasing the minimum wage, guaranteed income schemes and single-payer healthcare and stop listening to Trump’s blather about China.
China bashing and tariffs might sound good to unemployed factory workers and grumpy retirees, but they will not restore a single American job. Only policies that take stock of the new economic and technological realities will do that.