John Phipps: Do Manufacturing Job Gains Trump Trade War Losses?

08:00AM Jul 31, 2019
Trump Farm Bureau 18
While some data points to a dramatic decline in the trade deficit, other data tells the opposite story. John Phipps breaks down the discrepancy in John's World.
( Farm Journal )

OK – part 2 of grading the results of the tariffs imposed in 2018. Last week we looked at balance of trade and saw that with China the results were negative – the goods trade deficit continues to increase. This brought a question from Ted Rapson:

“This article indicates a dramatic decline in the trade deficit over the most recent five years. Your chart displayed today seemed to say the opposite has occurred under President Trump. Which one is correct?”

Good question - send an address, Ted. This is the article and the headline might be misleading.

John Phipps China 1

It refers to the monthly trade balance. It was the lowest in five years for March this year.

 

John Phipps China 2

 

March is often the slowest trade month, and it barely beat the previous low. Note the highest monthly trade deficit ever was just a few months ago in October 2018. The chart I used showed a rolling 12-month total, a form of annual summary which I think shows the trend better.

John Phipps China 3

 

On to the second initial goal: steel-making jobs. Here is what has happened since tariffs were put in place.

JOhn Phipps China 4

 

A gain of about 3600 jobs in the primary metals group, which includes aluminum. Less than one-percent. Those jobs cost American steel users about $900,000 each since importers pay tariffs, not China, despite the president’s frequent and false claim. It’s hard for me to call that a success, especially when almost all other parts of the economy were adding jobs much faster.

How about steel production?

 

John Phipps China 5

 

It’s hard to see a significant boost there. Steel prices have been another story.

John Phipps China 6

After peaking last fall, prices have dropped sharply domestically and globally, due to demand slowdown caused in turn by skyrocketing steel prices. Steel makers like US Steel are shutting down the last open-hearth furnaces due to cost and the inability to compete with arc furnaces. This could be reflected in steel industry employment in future months. In summary, the steel industry is in turmoil due to the tariffs and their consequences

 

John China 7

Bottom line for our scorecard: D-. A few jobs were created, and we will ignore the jobs lost in the steel-using industry until next week, when we complete our report.

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