Beyond Mere Words: If the Candidates' Rhetoric on Trade is Implemented, What Happens to the U.S. Economy?
Policy Event Summary: download file
The Georgetown Center for Business and Public Policy assembled an expert panel to discuss the likely economic impacts of the major party candidates’ proposed trade policies and positions. International trade has been a major issue in many U.S. presidential elections. However, this is the first election since World War II in which both major party candidates are rejecting trade liberalization. This presents an almost revolutionary prospect. Some believe their policies will correct imbalances and distortions in the trade-based economy. Others believe the positions could lead to a collapse of the carefully constructed, complex trading system that the U.S. has led since the Great Depression, with grave economic consequences for the U.S. and its trading partners. Key points from the discussion include:
- While both candidates oppose the Trans-Pacific Partnership or TPP, which is considered by many experts to be beneficial to U.S. economic growth, Trump's proposed 45% tariff on imports from China and 35% tariff on imports from Mexico are potentially highly disruptive to US trading relations. Economic modeling of the impact suggests that these tariff adjustments would send the U.S. into recession.
- Some people believe that the checks and balances inherent in the U.S. system would prevent a president from unilaterally implementing these proposals. However, congress has delegated a significant amount of authority to the president to manage U.S. international trade and a president could legally impose tariffs and other trade barriers under a number of existing statues.
- The uncertainty presented by proposed radical change in trade policy poses significant challenges to U.S. multinational corporations. Firms need to appraise the likelihood of tariffs and other protectionist measures and plan for ways to respond. Given the complexity of global value chains, firms' responses are likely to be highly idiosyncratic making forecasting regarding the employment impact in the U.S. (or anywhere else) difficult. But, measures such as those proposed by candidate Trump will disrupt existing corporate supply chains at great cost.
- Trade is a hot-button issue in the current election cycle. However, trade is unlikely the real culprit underlying the dissatisfaction in the electorate. Technological change is more likely the predominant source of dislocation in the economy. Faster economic growth, gains in employment and wages, of which there have been encouraging signs recently, may well assuage some of the anger. Broader and more robust programs are also necessary to help dislocated workers.
This panel discussion was moderated by J. Bradford Jensen, Senior Policy Scholar, Georgetown Center for Business and Public Policy and McCrane/Shaker Chair in International Business, McDonough School of Business, Georgetown University. Panelists included:
- R. Michael Gadbaw, Distinguished Senior Fellow, Institute of International Economic Law, Georgetown University Law Center
- Marcus Noland, Executive Vice President and Director of Studies, Peterson Institute
- Chris Padilla, Vice President of Government and Regulatory Affairs, IBM Corporation
- Robert J. Shapiro, Senior Policy Scholar, Georgetown Center for Business and Public Policy; Chairman, Sonecon LLC
This seminar is part of the Georgetown Center for Business and Public Policy's Georgetown on the Hill series at which we convene policymakers, academics, and industry experts to discuss important economic policy issues of the day.