What Happened: Manufacturing activity in the U.S. has not reversed despite billions of dollars in tariffs to discourage importing Chinese manufactured goods.
The trade deficit with China reduced in 2019. Still, the overall trade balance has soared to a record $84 billion in August as U.S. importers shifted to imports from Vietnam, Mexico, and other countries. Since the pandemic, China's trade deficit is back to where it was at the start of the Trump administration.
The goal of reshoring factory production to the U.S. is unfulfilled as job growth in manufacturing slowed since July 2018, while the manufacturing activity peaked in December 2018.
Why It Matters: Trump's trade advisers say that the tariffs of $370 billion on Chinese goods have succeeded in forcing China to agree to phase one trade deal in January and will end China's unfair practices over time.
Industry analysis by the Federal Reserve shows that tariffs helped boost employment by 0.3% by protecting domestic industries exposed to cheaper Chinese imports.
Those gains were more than offset by higher costs of Chinese imports due to tariffs, cutting manufacturing employment by 1.1% in the U.S. The retaliatory tariffs by China on the U.S. exports reduced domestic factory jobs by 0.7%.
According to Peterson Institute for International Economics trade expert Chad Bown, President Trump is not the first to use tariffs to protect industries, but this is the biggest use of tariffs since the Great Depression.
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