Editor’s Note: Leo Hindery Jr. is co-chair of the Task Force on Jobs Creation and a member of the Council on Foreign Relations. Formerly the CEO of AT&T Broadband and its predecessor, Tele-Communications, Inc. (TCI), he is currently an investor in media properties. The opinions expressed in this commentary are his own.
It’s clear that President Trump’s ongoing tariff gambit is a strategic blunder. Workers, consumers and farmers are already paying a steep price for the President’s shortsightedness, and there’s likely much more pain to come.
All of this chaos was avoidable, and tariffs should have been used as a last resort. Trump, instead, used them as his first action, with little regard for the adverse consequences to America’s economy and its workers.
Trump’s steel and aluminum tariffs, aimed mostly at China because of its dominance in producing these raw materials, demonstrates just how the President’s ill-conceived strategy has backfired.
Trump said that his tariffs would resuscitate American industry and create many new jobs. But, in fact, there are just over 140,000 Americans currently working in the steel industry, and data shows that fewer than 15,000 of these jobs have been added since the President took office.
The Trump administration blindly overlooked the reality that 46-times more American workers — 6.5 million in total — have jobs with manufacturers that use raw steel and aluminum. Making the materials which these manufacturers depend on much more expensive has actually forced them to cut jobs and raise the prices of their finished goods.
Trump is right on one thing, however: China does cheat in trade in many ways — especially through currency manipulation, providing low-cost capital and tax relief to its “state-owned enterprises,” intellectual property theft and forced technology transfers.
But we should stop China’s cheating with the combination of diplomacy and balanced responses that don’t bring the United States to the precipice of another recession. We should also turn to the World Trade Organization to prosecute any “product dumping” cases. Under the WTO, an exported good is considered to be “dumped”, by a country or company, when its price is lower in the market that’s importing the product than it is in the exporter’s domestic market. This tactic undercuts domestic producers and can force them out of business.
There can never be a successful tariff war between two trading countries that have a large export imbalance, like the United States and China. How can Trump’s tariff war ever work out when each year the United States purchases about $400 billion more in manufactured goods from China than China purchases in goods and services from the United States?
If Trump continues to tariff Chinese goods, the real losers will be the American consumers, manufacturers and farmers who will bear the costs. These costs will be far greater than those borne by their Chinese counterparts simply because the Chinese purchase so much less from us than we do from them.
We need a new approach.
First, we must address the conditions that have led to our massive trade deficit in manufactured goods. Only 8.5% of America’s workers are currently employed in manufacturing and our manufacturing sector contributes only about 12% of US GDP - by contrast China’s manufacturing sectors contribute about 40% of China’s GDP.
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Trump should create a permanent Council on Manufacturing consisting of senior government officials, private sector leaders and labor representatives, to help the federal government develop smart manufacturing policies. Their goal: to increase the size of our nation’s manufacturing sector to 10% to 12% of total employment.
In the interim we must, within the rules of the World Trade Organization, target the underpinnings of China’s so-called “competitive advantage,” namely, its wide array of illegal subsidies. Most importantly, we can initiate anti-dumping complaints with the WTO to investigate if China is selling the US export goods below their home market values. If it is found that China is in fact dumping, then we can impose “countervailing duties” - import taxes imposed on specific goods in order to prevent such dumping and to counter the obvious export subsidies.
Third, we must better protect America’s national defense by eliminating the $135 billion annual trade deficit we have with China for what are called Advanced Technology Products, or ATPs. These are the vital products which the Department of Defense includes on its Militarily Critical Technologies List.
Every effort must be taken to restore to American shores the manufacturing of these critical ATPs: semiconductors, biotech medicines, fiber optics and satellite technology. National defense technology should never be offshored, and bringing it home to US manufacturers would also materially help reduce the theft by China of our vital intellectual property. Shutting off this outflow of business to China would immediately reduce 32% of our $419 billion overall trade deficit with China.
And fourth, we need to establish strict “buy-domestic/buy-American” procurement requirements on all future infrastructure projects which are funded or guaranteed either by the federal government or by the proposed national infrastructure bank currently being considered by Congress. No single measure would do more to resuscitate US manufacturing employment and rebalance our global trade in goods.
There are proven alternatives to Trump’s ill-conceived and impulsive tariffs. We just have to pursue them before more damage is done.
