Trump’s Misunderstanding Of Trade And Manufacturing

trump-tradeTrump has repeatedly told us that America is losing to China and other nations. Only he can turn things around. However, America is still the most powerful nation on Earth. As shown in the chart below regarding California’s tremendous improvements in recent years, our country’s GDP is nearly 40% larger than China and approximately equal to the combined size of the next 7 nations: Japan, Germany, U.K., France, India, Italy and Brazil.

california-becomes-worlds-sixth-largest-economy

Investopedia provided an overview:

“The United States has been the world’s biggest economy since 1871. But that top ranking is now under threat from China….China is estimated to pull ahead of the U.S. steadily in the following years, taking over the lead position as the world’s largest economy…Will it even matter? Only for bragging rights! With a population less than one-fourth that of China, the U.S. is still projected to remain one of the world’s most prosperous economies, and still the far ahead in terms of per capita GDP, which reflects living standards and quality of life for a nation’s residents…U.S. economy remains the largest in the world in terms of nominal GDP. The $18.5 trillion U.S. economy is approximately 24.5% of the gross world product. The United States is an economic superpower that is highly advanced in terms of technology and infrastructure and has abundant natural resources. However, the U.S. economy loses its spot as the number one economy to China when measured in terms of GDP based on PPP. In these terms, China’s GDP is $21.3 trillion and the U.S. GDP is $18.5 trillion. However, the U.S. is way ahead of China in terms of GDP per capita (PPP) – approximately $57,294 in the U.S. versus $15,423 in China.”

u-s-seen-more-positively-than-china-globally

nominal-gdp-by-nation-2014

top-20-gdp-nations-2016

u-s-vs-china-favorability-and-perception-of-economic-power

Entire nations are equal to individual American states:

countries-with-similar-2014-gdp

Trump has raised a high level of alarm regarding jobs being sent overseas. But, his contentions on this topic are strikingly disproportionate and very misleading. In reply, National Public Radio referenced a major study, “The Myth and Reality of Manufacturing in America”, by Ball State University’s Center for Business and Economic Research:

“9 out of 10 manufacturing jobs have been lost to mechanization, not trade policies. ‘No matter how you measure it, 2015 was the record year for manufacturing production in the USA. Right now manufacturing in Indiana and the USA is at record levels. There’s no ambiguity on this….To be sure, our trade deficits have cost us manufacturing jobs. The high-end estimates are that today we have 1.5 million fewer manufacturing jobs across the nation because of foreign trade. All the other 6 million or so lost manufacturing jobs are due to mechanization, better technology and better production practices. Today’s typical factory workers make twice as much ‘stuff’ in an hour as they did in 1977. For every manufacturing job lost to trade, nearly 9 have been lost to machines. But trade also creates jobs. We have 7 million more transportation and logistics jobs alone, likely attributable to trade, since the 1970s.'”

U.S. manufacturing production is at an all-time high:

u-s-manufacturing-production-1919-2014

u-s-production-of-durable-and-non-durable-goods-1987-2013

The North American Free Trade Agreement is regularly maligned by Trump, as he says it’s been a “total disaster” (one of his favorite phrases that he repeatedly uses as a description for the policies of his opponents). In contrast, Bloomberg elaborates on why NAFTA was beneficial for the United States and Mexico in an article related to his visit to Mexico City in August 2016:

“Donald Trump said on Wednesday, [NAFTA] ‘has been a far greater benefit to Mexico’ than the U.S….but he didn’t disavow Nafta altogether…..Trump still got it wrong, though, when he said Nafta helped Mexico more than the U.S. He ignores the less quantifiable, hidden aspects of free trade that have helped the U.S. economy, such as an increase in higher-paying, export-related U.S. jobs, more competitive (and profitable) U.S. companies, and lower consumer prices at home….Out of a workforce of 135 million people, about 4 million to 6 million leave their jobs voluntarily or forcibly every month. The jobs lost to Mexico over a 20-year period amount to less than 0.1 percent of that turnover….Exports to Mexico have risen tremendously [$267 billion in 2015] — they were only $42 billion in 1993. That increase has come in part from Mexicans’ higher standard of living (because of Nafta). Today, exports to Mexico support six million U.S. jobs, many of which pay more than the blue-collar ones that were lost.”

nafta-gdp-growth-compared-to-population-increase-1960-2014

His devotees claim, in agreement with the man who constantly brags about his near mythical abilities, that Trump’s business expertise and success will substantially help them in ways no one else can.  They’re firm believers that he’ll move this country out the perilous jam it appears to be in. This especially applies to their constant refrains about the terrible shape of our trade deals, employment levels and wealth creation. As argued for above, these Trumpesque “credentials” are highly suspect and paper thin. And, what if the majority of his followers are not in a tough financial position like we’ve been led to believe?

Contrary to the popular perception that Trump’s appeal is largely toward downtrodden working class people, the average Trump voter is wealthier than most other Americans and the average follower of most other candidates.

Nate Silver is one of the most respected statisticians and poll analysts in the public square today. He’s a famously successful predictor of elections, as he was right about 49/50 states in 2008 presidential election and 50/50 in 2012. In early May 2016, he pointed to some vital data regarding Trump’s base:

“The median household income of a Trump voter so far in the primaries is about $72,000, based on estimates derived from exit polls and Census Bureau data. That’s lower than the $91,000 median for Kasich voters. But it’s well above the national median household income of about $56,000. It’s also higher than the median income for Hillary Clinton and Bernie Sanders supporters, which is around $61,000 for both.”

Vox research concurred with that of Silver:

“Trump supporters are richer, not poorer, than average: For one thing, [Gallup Organization’s researcher Jonathan] Rothwell found that both across the overall population and among whites, support for Trump is correlated with higher income, not lower. That’s not surprising; low-income people have always preferred Democrats. But it definitely contradicts the image of Trump as spokesman for the economically struggling….Rothwell also found that Trump supporters are no likelier to be unemployed or to have left the workforce. The problem of men dropping out of the labor force doesn’t seem to be a factor behind Trump’s rise.”

votes-by-income-trump-vs-clinton

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