Donald Trump Elected: How Will U.S. Trade Fare?
U.S. voters had their say yesterday, and they elected Donald Trump the 45th president of the United States in a sweeping victory.
World markets plummeted on the news, with stocks from London and Frankfurt to China and Japan nosediving. The Dow futures took a better than five-percent skid, prompting an automatic cessation of trading. Traders and investors unloaded oil, Mexican pesos, and U.S. dollars. The Japanese yen soared against the dollar.
Then, Trump came out to speak, and struck a conciliatory note, absent the usual bombast of his campaign appearances. The markets responded accordingly, recovering some of their losses, although they remained in the red.
How will U.S. international trade fare under President Trump? It depends on whether his actions match his words on the campaign trail.
During the campaign, Trump said he would renegoatiate the North American Free Trade Agreement between the U.S., Canada, and Mexico. He vowed to impose extrordinary taxes on imports from Mexico and punitive tariffs on imports from China, with the potential to spark a trade war between the world’s two biggest economies. China is the U.S.’s fourth largest export market, behind only Canada, Mexico, and the European Union.
If Trump’s deeds match his rhetoric, the Trans-Pacific Partnership (TTP) and the Transatlatic Trade and Investment Partnership (TTIP) were killed in action last night. Trump has also been highly critical of the World Trade Organization.
The president-elect advocated reshuffling security relationships with America’s closest allies in Europe and Asia, relationships that are intimately tied to U.S. trade with those countries and regions.
Once he assumes office, Trump—and the advisors who have his ear—ought to consider the important and growing role that trade has played in the U.S. economy.
According to the World Bank, trade comprised nine percent of U.S. gross domestic product in 1960. In 2015 that number stood at 28 percent. According to numbers from the Department of Commerce’s International Trade Administration, exports contributed to 13.5 percent of U.S. GDP in 2013.
The U.S. exports over $2.3 trillion of goods and services, with merchandize exports making up the lion’s share of those. U.S. exports grew by 96 percent between 2004 and 2013. The total value of U.S. trade amounted to $5 trillion in 2013.
Exports supported 11.3 million jobs in 2013, and every billion dollars of U.S. exports supports 5,600 jobs.
Over 300,000 U.S. companies export goods and 98 percent of them are small- and medium-sized enterprises—companies with fewer than 500 employees. SMEs account for one-third of total U.S. export value.
Almost half of all U.S. goods exports in 2015—for a total of $710 billion—went to countries with which the United States has a trade agreement. Over 70 percent of those exports—valued at $516 billion—went to U.S. NAFTA partners Canada and Mexico.
In 14 states, over 55 percent of exports went to free trade partners, including states like Ohio, Michigan, and Wisconsin, states that—surprisingly to the pundits—put Trump over the top in the election.
Trump won, presumably, by appealing to workers who feel that trade and globalization have left them behind. But trade has also produced millions of new jobs—for manufacturing workers and truckers and port personnel—everyone from one end of the supply chain to the other who play a role in producing goods and seeing that they get to their ultimate destinations, and that includes jobs generated by imports to the U.S., and there are many of them as well. Imports also provide benefits to U.S. consumers—especially lower income ones—allowing them to buy less-expensive goods from abroad.
U.S. exports have generated billions of dollars in value for entrepreneurs and shareholders. Without vibrant and welcoming export markets, U.S. businesses cannot succeed the way they have in recent years.
President-elect Trump won the election, at least in part, by appealing to the anger and frustration of those who want to blow up the system, including the international trade system. Once he succeeds to power in January, he really shouldn’t do that.
Peter Buxbaum is web editor of Global Trade.