Another justification, which has more credibility among policy types in Washington, DC, is that, if well targeted, tariffs can meet national-security needs. When it recently increased levies on Chinese EVs, semiconductors and solar modules, the Biden administration said that China’s clout in such industries created unacceptable risks for America’s economic security.
America and other countries do have reason to fret about Chinese dominance of critical technologies, not least because of China’s willingness to block exports during international spats. But using tariffs for national-security goals poses problems. Invoking security becomes a convenient excuse for protectionism, as when the Trump administration placed tariffs on steel and aluminium imports from the EU and Japan. Moreover, a tariff is not exactly a robust defence against a true security threat. “If something is really dangerous, you should probably ban it rather than tax it,” says Ed Gresser of the Progressive Policy Institute, a think-tank.
A final defence of tariffs is a more limited version of the first supposed rationale. Rather than saying that tariffs benefit the economy as a whole, advocates say they are needed to support the growth of specific sectors. The Biden administration has, for instance, argued that its new China tariffs are protecting the very sectors that the government has been trying to cultivate through its big investments.
TRADE FACT OF THE WEEK: Pennsylvania produces 1.5% of all world energy.
THE NUMBERS: World energy production, 2022, in BTUs* –
Area
Energy production
World
598 quadrillion BTUs
China
137 quadrillion
U.S.
99 quadrillion
(Texas)
25 quadrillion
(Pennsylvania)
10 quadrillion
(New Mexico)
7 quadrillion
Russia
60 quadrillion
Saudi Arabia
30 quadrillion
India
22 quadrillion
Canada
22 quadrillion
All other
228 quadrillion
* Energy Information Administration. A “BTU” (British Thermal Unit) is the amount of energy needed to raise the temperature of a pound of water by one degree Fahrenheit.
WHAT THEY MEAN:
From the “oil shocks” of the 1970s until recently, energy policy arguments featured mostly moaning, grim charts illustrating the consequences of “energy dependence” on unstable parts of the world, and predictions that things would get worse. Here’s what’s actually happened, using the year 2003 — 20 years ago — as a point of departure:
Starting point: According to the Energy Information Administration (the Department of Energy’s data and research arm), in 2003, Americans produced 67.3 quadrillion “BTUs” worth of energy, and used 95.8 quadrillion BTUs. This meant Americans bought, on net, about 28.5 quadrillion BTUs from foreigners, mostly in the form of crude oil. The resulting economy (a) employed 130 million people, (b) produced $11.7 trillion worth of farm products, manufactured goods, movies, government programs, and other goods and services (which, converted to the Bureau of Economic Analysis’ “constant 2017 dollar” figures to allow for meaningful comparisons with today’s economy, would be $14.9 trillion), and (c) released 5.7 billion tons of carbon dioxide.
Since then, two big changes in the energy figures:
More production: Scarcity and price instability produced curiosity about whether we might find more at home. With heavy deployment of solar panels and wind turbines, drilling for natural gas, and so forth, the BTU count of domestically produced energy has grown from 67.3 quadrillion in 2003 to 91.9 quadrillion in 2020, and 102.8 quadrillion in 2023. In other words, domestic energy production has jumped by 40% since 2003, and by 10% since 2020. According to the Bureau of Economic Analysis, Pennsylvania — the site of the world’s first oil well in 1859 — has seen energy income rise like this:
Year
Energy Income
2023
$8.1 billion
2019
$5.3 billion
2003
$0.3 billion
More Efficiency: Likewise, scarcity and price instability produce caution, efficiency, and savings. As America’s energy production has grown, use has dropped from 95.8 quadrillion BTUs in 2003 to 93.6 quadrillion in 2023. To put this 2.2 quadrillion BTU drop in perspective, total annual energy “consumption” figures are 10.8 quadrillion BTUs in Brazil, 1.6 quadrillion in Sweden, and 4.9 quadrillion in Taiwan. Carbon dioxide emissions, meanwhile, have dropped by about 25%, from 6 billion tons a year in the mid-2000s to 4.5 billion as of 2023.
Endpoint: As of 2023, the $28 trillion U.S. economy – $22.7 trillion in BEA’s constant 2017 dollars — employed 156 million people. Converting all this into BEA’s inflation-adjusted “constant 2017 dollars,” the 2% decline in energy use, and the accompanying 25% drop in carbon dioxide emissions, have accompanied the following big-picture changes:
2003
2023
Change
‘Real’ GDP
$14.9 trillion
$22.7 trillion
+52%
Manufacturing
$1.7 trillion
$2.3 trillion
+36%
Mining
$0.16 trillion
$0.34 trillion
+111%
Agriculture
$0.14 trillion
$0.19 trillion
+36%
Employment
130 million
156 million
+26 million
With respect to trade, meanwhile, the “dependence” of the 1970s through 2000s has not totally vanished — Americans still buy lots of crude oil from the Middle East, lots of solar panels from Southeast Asia, and lots of electricity from Canada. But fundamentally, the world depends on the U.S. to sell energy, not the other way around. Trade balance data, converted into BTUs, look like this:
What can we expect next? Energy trading will likely change sharply in the next decade, as fossil fuel use falls and countries rely more frequently on materials and machines used to generate and convert electricity, and thus use electricity in ways that look like “stocks” than “flows.” Neither renewable technologies like wind turbines nor electrified end-use technologies like heat pumps and batteries, for example, use fuels to operate. So perhaps “trade” will include fewer BTUs overall, and more materials and machines used to generate and convert electricity. Having surprised everyone by evolving into the world’s top source of energy since 2003, the U.S. now likely needs more powerful domestic clean energy supply chains to stay in the role.
* The “British Thermal Unit,” like the 159-liter/42-gallon “barrel” of oil, is a defiantly non-metric energy unit. The BTU and the annual amount of dollar-trading on forex exchanges are the only indexes of human activity measured in quadrillions, and BTUs will likely soon hit the 1 quintillion — 1,000,000,000,000,000,000 — plane. As a comparison, the mass of the moon is about 78 quintillion tons.
Note on this: China is the world’s top energy producer, but rankings look different depending on the type. Of China’s 138 quadrillion BTUs, 106 quadrillion come from coal. India is the No. 2 coal producer at 17 quadrillion BTU, and Indonesia is third at 12 quadrillion; together with China, this is 80% of world energy from coal. The U.S. however edges China by 15 quadrillion to 14 quadrillion in “nuclear, renewables, and other”; the U.S. is also first in both natural gas at 37 quadrillion BTU (above Russia’s 23 quadrillion and Iran’s 10 quadrillion), and petroleum at 32 quadrillion as against Saudi Arabia’s 25 and Russia’s 23.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
FACT: Is U.S. income inequality starting to decline?
THE NUMBERS: U.S. “Gini coefficient” –
Year
U.S. Gini coefficient
2023
0.485
2022
0.489
2021
0.494
2020
0.488
WHAT THEY MEAN:
Last week’s Bureau of Economic Analysis calculations report that, since 2020, the U.S. economy has “grown” from $21.3 trillion to about $29.0 trillion this year, with “wages and compensation” making up about half of the total growth. Discounting inflation, the U.S. economy of 2024 is about $3.2 trillion larger than that of 2020, and incomes — workers, executives, farmers, self-employed, etc. — perhaps $2 trillion more. Who is making all this extra money? BEA gives you lots of ways to divide it, but one heartening point: with income inequality diminishing in 2022 and 2023, low-income and “working” families are getting a bit more of it than they were before.
As a point of departure, the “Gini coefficient,” devised by Venetian statistician Corrado Gini in 1912 (see more below on this unlovable person), provides a widely used measure of income equality. The “coefficient” runs from 0.000 to 1.000. At the theoretical 0.000 extreme, every clone-like individual (or every household, depending on what you’re measuring) would make exactly the same amount of money. The other end, 1.000, represents a Pharaoh-like state in which one single person gets every nickel. No country is especially close to either 0 or 1, but the U.S. shows up on the “more unequal” side. World Bank data for high-income countries, for example, finds only Chile and Panama with more “unequal divisions of income.” Here’s a representative sample of countries from their list (using only countries for the Bank has results for 2020 r more recent years), bracketed by Colombia at the “most income-unequal” end of the spectrum and Slovakia as “most equal”:
Country
Gini coefficient
Colombia
0.548
Brazil
0.520
Zimbabwe
0.503
Costa Rica
0.467
United States
0.413
China
0.357
Thailand
0.349
Australia
0.343
United Kingdom
0.329
Germany
0.324
India
0.328
Canada
0.317
Denmark
0.283
Netherlands
0.257
Slovakia
0.234
This placing for the U.S. in 2022 reflects the end-point of a longstanding trend, in which American incomes have been growing apart for about five decades. (Or, more precisely, the top end has been stretching up, relative especially to the bottom tiers.) Census records, which use a different approach than the Bank’s but find similar outcomes, put America’s Gini coefficient at 0.397 in 1967, then a slightly higher 0.403 in 1980, 0.462 in 2000, 0.481 in 2016, and 0.494 in 2021. In more real-world terms (with numbers adjusted for inflation), here’s how the Census sees family incomes changing from 2000 to 2021:
Income Group
Income 2020
Income 2021
Growth
Top 20%
$237,300
$301,600
+27.1%
4th “quintile”
$109,500
$129,300
+18.1%
Middle “quintile”
$70,430
$79,830
+13.3%
2nd “quintile”
$42,490
$45,940
+8.1%
Lowest 20%
$16,940
$16,640
-1.8%
Obviously, bare income data blurs some important points and conceals others altogether. Census uses “pre-tax income”; were they to add health insurance subsidies, student aid, nutrition programs, and so on, inequality and income measurements would look somewhat different, and the second and first “quintiles,” in particular, would fare better. Likewise, the quintiles of 2000 aren’t the same as those of 2023: a larger share of lowest-20% families, for example, may be recent immigrants expecting better things soon. But this noted, the patterns do suggest that (a) America’s affluent families gained ground faster in the century’s first two decades than the middle class, and the middle class faster than working families and the poor; and (b) inflation and rising housing prices (and taxation of clothes, spoons, and life necessities) hit lower-quintile families hardest.
Returning now to the most recent BEA and Census income and equality data, the record since the COVID-19 pandemic, and over the Biden/Harris administration’s first three years, looks strikingly better.
Census published its income figures for 2023 last month. They show the national “Gini coefficient” peaking at 0.494 in 2021, then falling to 0.489 in 2022 and 0.485 in 2023 — still high in historic terms, but the lowest figure since 2017. Meanwhile, the bottom three quintiles’ share of national income rose from 24.8% in 2021 to 25.5% in 2023, while the top 5%’s share fell from 52.7% to 51.9%. Taking this from percentages to actual income, in 2023 families earned about $17 trillion (including wages and salaries, plus pension payments, investment earnings, rental properties and farm incomes). Assuming shifting income distribution doesn’t change the totals, moving 1% of this $17 trillion from the wealthiest 5% to the bottom 60% means an additional $170 billion for the 83 million American middle- and low-income households, or an average of $2,000 each.
The International Monetary Fund’s World Economic Outlook database (note updates coming in a couple of weeks) has growth, GDP size, and lots more for the world, regions, and countries.
The World Bank’s table comparing income inequality across countries, with (generalizing a bit) Latin America and southern Africa as the world’s least equal regions, and central and northern Europe most equal:
Dr. Gini, though a pioneer of modern statistics, was also a sinister political nitwit. Head of the International Statistical Society in the 1920s, Gini also moonlighted as president of the Italian Eugenics Society, believed the “reproductive instinct” was in long-term decline, and as an enthusiastic Mussolini supporter wrote tracts such as the English-language article The Scientific Basis of Fascism. Later on he changed his mind and adopted a totally different view of the world, proposing in 1944 that the United States annex all the other countries and form a world government. A bio.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
FACT: In a hypothetical Trump/Vance economy, a toaster would cost about $300.
THE NUMBERS: Toaster prices, September 2024* –
Model / Range
Made in
Price
Milantoast
Milan
€335
Dualit “Classic”
West Sussex
£170 – £249.99
Mitsubishi Electric TO-ST1-T
Suburbs of Tokyo
$246.68
Neiman Marcus range
$90 – $900
Walmart/Amazon/Target/Costco/Macy’s range
$15 – $40
* PPI surveys for mainstream retailers and Neiman Marcus prices; Amazon for the TO-ST1-T; manufacturer sites for Dualit Classic and Milantoast.
WHAT THEY MEAN:
Here’s Vice Presidential aspirant Senator J.D. Vance in Nevada last July: “We believe that a million cheap knockoff toasters aren’t worth the price of a single U.S. manufacturing job.” The unspoken converse (and as explained below, the more realistic interpretation) is that no toaster price would be too high to shift a single worker into U.S.-based pop-up production. Here’s what this might mean:
Background: If you haven’t recently bought a toaster, mainstream retailers sell them at prices typically between $15 and $40. (We checked Target, Costco, Amazon, Macy’s, and Walmart. You can pay more if you like, of course.) Your purchase won’t be U.S.-made, unless you’re a specialized buyer: kitchen appliance manufacturers do make toasters here, but only big conveyor types for restaurants and hotels. As an example, Holman Star’s factory in Smithville, Tennessee, produces machines in a range from the $1,487 QCS1-350, which browns 350 slices an hour, to the 2,000-slices-per hour Star DT-14 Double Conveyor at $7,273. No U.S. company, though, makes a small home pop-up here.
Overseas Comparisons: Home toaster-making in wealthy “peer” economies, however, is perfectly possible. Firms in the U.K., Italy, and Japan make them now. They’re pricey, though. The U.K.’s Dualit Classic, with a silvery ‘retro’ look drawn from 1950s design, is “hand-built” in West Sussex and sells at prices from £170 for a two-slice model to £249.99 for a 6-slicer. (At $1.31 per pound sterling, this is $250 to $360.) Italy’s Milantoast makes an austere designer-black two-slice pop-up in Milan for €335. ($372, at $1.11 per euro.) And Mitsubishi Electric’s futuristic TO-ST1-T, launched in 2019 and made in two factories outside Tokyo, blends a tea-ceremony-suitable “simple shape and wood grain” look with high-tech programming to provide the precise browning of your choice, preserve the bread’s interior moisture, and offer “fluffy French toast,” “Korean street egg toast,” and DIY options. A connoisseurs’ piece, the TO-ST1-T costs $246.88 and makes one slice at a time, no more. (For purists, yes, it is technically a “bread oven” rather than a pop-up. Close enough, in our opinion.)
In sum, “developed” high-income countries do make home toasters. But they are profitable at prices about ten times those you’d find in mainstream U.S. retail outlets. Looked at another way, the $300 or so you’d pay for a Dualit Classic, Milantoast, or Mitsubishi is at the midpoint of this week’s Neiman Marcus catalog, whose cheapest toaster option is a $90 polka-dotted Kate Spade, and priciest a $900 Dolce & Gabbana “Sicily is My Love,” both produced in China.
So to achieve Vance’s apparent goal, mainstream toaster prices would probably have to rise to Neiman Marcus levels, say $300 each. More generally, we assume he isn’t fixated on toasters specifically, but uses them as one specific example of a more general aspiration for appliance-type products. How would this hypothetical Trump/Vance-world look to families? To workers? And could their tariff ideas deliver it?
Family budgets: The Bureau of Labor Statistics’ most recent “Consumer Expenditure Survey” has family budget data for 2022. That year’s average (mean) U.S. household spent $73,000, including about $20,000 on goods purchases excluding restaurant meals. Small appliances cost them $142, and large appliances $408. That means $550 for appliances, 0.8% of the total budget and 2.5% of the goods-purchase budget.* If appliance prices generally rose to levels typical of the Dualits, Milantoasts, and Mitsubishis, family appliance bills would jump from $550 to about $5,000. That would mean a 25% increase in total U.S. household spending on goods. Few working families could afford that, of course. So home appliances would drop out of their present “easily affordable labor-saving device” range into a “scrimp-and-save luxury” tier. Families would still need some, though, and would presumably scale back their entertainment, education, health, auto repair, and other discretionary choices to buy an occasional vacuum cleaner, microwave, iron, washing machine, microwave, or toaster.
Employment: And what labor impact could we expect? Again by BLS’ estimates, 64,290 Americans, including 36,940 production workers, now work in home appliance manufacturing. The production workers’ average (mean) hourly earnings are $21.42. (The median wage is a nearly identical $21.23.) By comparison, average U.S. hourly production-worker earnings are $30.27 for the whole private sector, $27.96 for all manufacturing, $23.51 in electronics and appliance retail, and $18.91 in hardware retail. So pushing workers out of the toaster sections of appliance and hardware retailers into hypothetical toaster-making assembly lines would likely leave wages a bit better for some, a bit worse for others, and overall about the same.
Trade policy: Whether or not this is a good idea in principle, could the Trump/Vance tariff program — 10% or 20% tariffs on all goods, and 60% tariffs on Chinese-made products – actually do it? Pretty clearly not. The U.S. already charges a 5.3% tariff on pop-up toasters (HTS 85167200). None are made here. So as with a lot of U.S. tariff lines, the toaster tariff’s only effect is somewhat higher prices. To get the spectacular ten-fold price-hike that sustains super-toaster making in Japan, Italy, and the U.K., you’d need a 900% tariff or some equivalent policy. (Or, if you need only a five-fold price jump to make less impressive appliances profitable, 400%.) In fact, the additional Trump/Vance tariffs on metals, wiring, buttons, plastics, and other inputs would make U.S.-based toaster-making — including for currently successful producers like Holman Star — harder, not easier. The differentially higher tariff on Chinese-made popups might push some into Vietnam or the Philippines, or possibly Mexico, but that would be the end of it.
In sum, Vance-world looks very expensive for families, not obviously better for workers, and not realistic anyway.
* For some more specific cases, the BLS says single-parent families, with lower earnings, spent $438 out of $56,240 on appliances, about the same 0.8% share of the budget. BLS’ top-earner families average $322,000 in household income and put $1084 into appliance-shopping out of $167,088 in total spending (maybe getting the Kate Spade or something similar?) for a slightly smaller 0.6% of the family budget.
FURTHER READING
Special note: Research on U.K. and U.S. toaster-making for this Trade Fact by 2024 PPI Policy Fellow Julia Amann. Research on Japanese toaster-production by PPI Senior Fellow Yuka Hayashi.
And just to make it more complicated and more realistic –
The Trump-Vance tariff pitch is for “tariffs on everything”. This includes toasters, but as noted above, also on the things needed to make toasters: metal, wires, buttons, plastics, insulation, etc. Shoppers would pay the toaster-tariff, but companies like Star Holman (and by extension, any business and workers making appliances in the United States) would pay tariffs on the inputs. As their production costs rose, appliance-production in the United States would grow more difficult. From the small-government, free-market right, National Review’s Dominic Pino reports on American kitchen appliance-makers’ unhappy experience with Trump-era metals tariffs.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
FACT: “Sometimes countries make big and fateful choices … and sometimes their big and fateful choices go badly wrong.”
THE NUMBERS: U.S. hourly-wage and comparable workers, 2023* –
Total Employed:
161.0 million
Hourly wages or equivalent
80.5 million
“Industrial” hourly-wage workers**
15.7 million
“Non-industrial” hourly-wage workers
64.8 million
* Bureau of Labor Statistics, full-year averages
** “Industrial” includes 8.9 million manufacturing workers, 5.7 million in construction, 0.3 million in energy and mining, and 0.8 million in agriculture. Top “non-industrial” categories include 12.5 million workers in health and social assistance, 10.9 million in retail, and 7.3 million in restaurants and other food service jobs.
“Sometimes countries make big and fateful choices. … And sometimes big and fateful choices go badly wrong. American isolationism in the 1920s and 1930s helped make World War II possible. The ‘America First Committee’ policies*, had the U.S. adopted them in 1940, might have caused its loss. Hoover’s 1930 tariff hikes, advertised as a way to keep U.S. wages high and jobs at home, provoked retaliations and a deepened economic contraction, leaving exporters bankrupt and workers unemployed. These ideas’ return in 2024 presages a time in which American influence falls abroad, the cost of living soars at home, the U.S. and global economies grow more volatile, and the risks of world politics rise.”
Now as in the past, the best response to bad and dangerous ideas is to reject them and propose good ones instead. As Mr. Trump and Sen. Vance try to re-animate 1920s/1930s isolationism, Vice President Harris is creating a modernized, Roosevelt-like alternative. Starting from the basic conviction that American leadership can make the world safer and better, she affirms core U.S. alliances and support for Ukraine, and directly attacks on Mr. Trump’s neo-Hooverite tariff obsession:
“He wants to impose what is, in effect, a national sales tax on everyday products and basic necessities that we import from other countries. That will devastate Americans. It will mean higher prices on just about every one of your daily needs: a Trump tax on gas, a Trump tax on food, a Trump tax on clothing, a Trump tax on over-the-counter medication. … Donald Trump’s plan would cost a typical family $3,900 a year. At this moment when everyday prices are too high, he will make them even higher.”
Harris’ concise takedown perfectly matches George Orwell’s appeal for clarity and brevity (“use the fewest and shortest words necessary to carry your meaning”) in Politics and the English Language. From a different angle (Bipartisan Infrastructure Act seaport investments), Transportation Secretary Buttigieg does the same in explaining the benefit Americans can draw from opening markets abroad and lowering the costs of trade: “keep prices down, shelves stocked, and American farms and businesses selling their goods around the world.”
What, then, should replace Mr. Trump’s national sales tax? The report — the fourth in PPI’s “Campaign for Working America” series this year, with others on housing, non-college career paths, and competition — assesses the limitations of “Bidenomics”’ honorable-but-not-quite-successful effort to create a “worker-centred” trade policy, and then suggests ways to connect trade policy to blue-collar aspirations and concerns, organized around a “guidepost” and four policy themes. A precis:
Guidepost: Per data from the Bureau of Labor Statistics, about half of last year’s 160 million working Americans were “blue-collar” men and women earning hourly wages or an equivalent type of income. Just under 16 million are “industrial” workers in factories, on construction sites, or in mining or farm work; the other 65 million are “non-industrial” workers in health and caregiving, retail, restaurants and bars, repair shops, bus routes, and similar jobs. A successful policy has to consider the interest of the non-industrial workers as well as the industrials.
Theme 1: Bring home goods prices down by purging junk tariffs. Reduce the cost of living by purging the 11,414-line tariff system of lines — for groceries, for clothes and shoes, for small appliances, and table silverware – which raise prices, discriminate against women and lower-income families, and don’t protect any jobs. The launch for this is the Fletcher/Pettersen Pink Tariffs Study Act introduced by Reps. Lizzie Fletcher and Brittany Pettersen this spring.
Theme 2: Help workers find better jobs by creating more export opportunities. Data from the Census and BEA illustrate the high quality of jobs in exporting firms. As just one example, African American-owned exporting firms average 10 more employees and $10,000 more in payroll per worker than the U.S. business community generally. Here the next president can build on some creative Biden team policy launches — see Secretary Raimondo’s launch of the Global Diversity Exporter Initiative — and combine this with revived Obama-era themes of opening markets, pooling strengths, and building relationships with friends and allies.
Theme 3: Make the right exceptions. President Biden’s “industrial strategy” program is still a work in progress. Its most ambitious projects, in particular the hope to shift the $180 billion U.S. auto industry toward lower-emissions EV production, are still in their early phases. Here, the Biden team’s decision to use tariffs has a reasonable foundation. With China having gotten to mass-market, low-price EV first (after a very large barrage of its own subsidies), U.S. battery and plant factories should have some time to catch up. This probably shouldn’t be permanent but it’s the appropriate type of exception.
Theme 4: Give workers more help. By 2028, all dislocated workers — and long-term unemployed, young people looking to move to a second job, workers with mediocre jobs imagining something better ‚ should be able to design a tailored set of supports that fit their needs, from training, career services, apprenticeships, to temporary wage subsidies for older workers.
More detail on each of these in the report, of course. Returning, though, to the big choice ahead, here’s a final thought on risk and an optimistic close:
“The Trump campaign’s attempted resurrection of isolationism — its resurrection of “America First” political isolationism, its economic Hooverism, its disdain for America’s allies and international leadership — is full of risk. Risk of repeating the awful mistakes of the 1930s, risk of new economic shocks and volatility, risk of conflict as America’s friends are demoralized, and aggressive dictators grow bolder. Once made, such a choice takes decades to undo.
“Vice President Harris is right to reject it. She is right to insist on the centrality of alliances among democracies, right to highlight the costs higher tariffs will impose on families, and right to use her early speeches and September debate victory to explain the risks Trumpism poses on both counts. She can cap this, and underline her own optimism and strength, with a clear and appealing alternative that lowers costs, helps workers find new and better job opportunities, and strengthens security in both personal and national senses. That is the alternative hourly-wage Americans and the nation as a whole need, as their large and fateful choice approaches.”
* The “America First Committee,” founded in 1940, was a group organized to stop the Roosevelt administration from providing “Lend-Lease” military aid to Britain as it fought alone. See below for a book rec.
Susan Dunn’s 1940: FDR, Willkie, Lindbergh, Hitler – the Election Amid the Storm, has background on the people and goals of the “America First Committee.”
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
WASHINGTON — The Progressive Policy Institute (PPI) today released a new report, “Trump’s Folly, Harris’ Opportunity: Trade and the Hourly-Wage Worker,” authored by Edward Gresser, Vice President and Director for Trade and Global Markets at PPI. This report highlights Vice President Kamala Harris’s strong critique of former President Donald Trump’s tariff increases, points out the harm Trump’s 1930s-style isolationism would impose, and offers ideas for trade policy with particular benefit for hourly-wage workers’ cost of living, job opportunities, and security.
This new publication is the fourth in a series of papers published in PPI’s Campaign for Working America, which was launched earlier this year in partnership with former U.S. Representative Tim Ryan of Ohio. The Campaign aims to develop and test new themes, ideas, and policy proposals that help Democrats and other center-left leaders make a compelling economic offer to working Americans, bridge divides on culturally sensitive issues like immigration and education, and rally public support for the defense of democracy and freedom globally. Other papers cover career paths for non-college workers, housing, and competition.
The report notes that Harris has taken a clear and forceful position against Trump’s trade isolationism in recent speeches and her September debate — an approach quite different and sharper than the softer, “blur-the-difference” tactics Hillary Clinton chose for trade issues in 2016 and the Biden political team adopted in early 2023.
“As Vice President Harris has said, Trump’s proposed tariffs would act as a national sales tax, raising prices on everyday goods like food, fuel, and medicine, which would hit working families the hardest,” said Gresser. “She now has the opportunity to offer an alternative that lowers costs, helps to improve job quality, and strengthens international partnerships.”
The report outlines the risks posed by Trump’s isolationist economic policies, which include higher consumer prices and decreased global influence for the United States. It also offers ideas for a trade policy under Harris with particular though not exclusive attention to blue-collar interests, with one “guidepost” and four themes:
Guidepost: Take the interest of all workers into account, including non-industrial workers worried about rising costs of living, exporting workers, and workers competing against rising competition from China and other producers,
• Theme 1: Cut families’ living costs by purging the U.S. tariff system of outdated but expensive tariffs.
• Theme 2: Improve job opportunities by promoting exports and opening markets.
• Theme 3: Ensuring that tariffs are applied temporarily when justified for emerging or transition industries, as in the case of electric vehicles, but as unusual exceptions with known disadvantages rather than frequent resorts.
• Theme 4: Improve opportunities for all displaced workers to get the services and support they need.
“The Trump campaign’s attempted resurrection of isolationism is full of risk. Vice President Harris is right to reject it. She can underline her own optimism and strength, and Trumpism’s defeatism and risk, with a clear and appealing alternative that lowers costs, helps workers find new and better job opportunities, and strengthens security both for families and for the country,” Gresser concluded.
Sometimes countries make big and fateful choices, and one is coming soon. Eighty years after the birth of postwar liberal internationalism, with its system of alliances among democracies, trade liberalization, and international law, Donald Trump’s 2024 campaign aims to recreate the policies of Franklin Roosevelt’s isolationist predecessors and opponents.
Lifting the name and ideology of the “America First Committee” — a group organized to oppose military aid for Britain as it fought alone in 1940 — Trump’s program implies rupturing NATO and other core alliances, and ending aid to Ukraine. Matching this political retreat, it attempts to resurrect the economic isolationism Herbert Hoover ran on in 1928, proposing tariffs of 10% or 20% on all goods — energy, cars, peaches, OTC medicine, all the rest — and of 60% on Chinese-made goods.
And sometimes big choices go badly wrong. American isolationism in the 1920s and 1930s helped make World War II possible. The “America First Committee” policies, had the U.S. adopted them in 1940, might have caused its loss. Hoover’s 1930 tariff hikes, advertised as a way to keep U.S. wages high and jobs at home, provoked retaliations and a deepened economic contraction, leaving exporters bankrupt and workers unemployed. These ideas’ return in 2024 presages a time in which American influence falls abroad, the cost of living soars at home, the U.S. and global economies grow more volatile,
and the risks of world politics rise.
The right response to bad and dangerous ideas is to reject them and propose something better. Vice President Harris has made a very good start on this as nominee. Politically she has chosen continuity, underlining the importance of NATO and U.S. alliances generally, and maintaining military aid to Ukraine. Economically, from an August economic speech to the first volley of her September debate victory over Trump, she has replaced the soft, “blur-the-differences” approach Hillary Clinton took in 2016 by opposing President Obama’s Trans-Pacific Partnership and the Biden administration adopted in early 2023 with a direct attack on Trump’s Hooverite tariff obsession. Here’s the speech version, which calmly and precisely explains Trumpism’s cost for working families:
“He wants to impose what is, in effect, a national sales tax on everyday products and basic necessities that we import from other countries. That will devastate Americans. It will mean higher prices on just about every one of your daily needs: a Trump tax on gas, a Trump tax on food, a Trump tax on clothing, a Trump tax on over-the-counter medication. … Donald Trump’s plan would cost a typical family $3,900 a year. At this moment when everyday prices are too high, he will make them even higher.”
Here, Harris accurately describes Trumpist economic isolationism and connects it to a core public concern. The next step is to offer a choice between Trumpism’s risks and resentments on one hand, and on the other a plan to lower costs for families, strengthen relations with America’s friends, and help workers raise their pay and improve their jobs. To envision what it might
be, keep the basics in mind, assess the places in which “Bidenomics” fell short, and look at a model of the way clear and simple language can help organize thought and policy.
WASHINGTON — As the U.S. seeks to bolster its domestic manufacturing, the role of foreign direct investment (FDI) is more critical than ever, particularly from trusted allies. This insight is at the heart of a new report from the Progressive Policy Institute (PPI), titled “The U.S. Wants Manufacturing to Drive Growth. Foreign Friends Can Help.” The report examines the converse of U.S. “friendshoring” in friendly countries: the potential for allied nations like Japan, South Korea, Canada, the UK, and Germany to support U.S. economic growth through investment in sectors ranging from electric vehicles to biopharmaceuticals.
The report, authored by Yuka Hayashi, is the second in a two-part series. The first, “Behind Japan’s U.S. Steel Bid: An Aging, Shrinking Home Market,” provides a fresh perspective on Nippon Steel’s proposed acquisition of U.S. Steel and closely examines the economic realities behind Nippon Steel’s pursuit of the American industrial icon.
The new report highlights how these investments can create high-paying jobs, drive technological innovation, and strengthen America’s position in the global economy. Drawing on examples from states like Ohio, Michigan, and North Carolina, where Japanese companies have built major manufacturing hubs, the study argues that such partnerships are essential to America’s economic future.
“If the U.S. wants to strengthen domestic manufacturing, promoting foreign investment from friendly countries is a smart strategy,” said Hayashi. “Not only does it create good-paying jobs and spur innovation, but it also deepens our economic ties with trusted allies, ensuring that critical industries remain secure.”
The report stresses that the U.S. must be strategic in welcoming investment from allied nations, especially in the context of growing tensions with China. As part of this strategy, the report calls for expanding “friend-shoring” partnerships — moving supply chains to allied nations to ensure resilience and stability.
In light of the Inflation Reduction Act and the CHIPS and Science Act, both passed in 2022, PPI’s report underscores the opportunity for the U.S. to attract even more foreign investment, particularly in green technology and semiconductor manufacturing. It also warns that protectionist policies could deter friendly nations from further investing in the U.S. economy.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org. Find an expert at PPI and follow us on Twitter.
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Media Contact: Ian O’Keefe – iokeefe@ppionline.org
As the world grappled with shortages and soaring prices of energy and food following Russia’s invasion of Ukraine in the spring of 2022, Treasury Secretary Janet Yellen introduced the term “friend-shoring” to describe a new dynamic needed for America’s economic engagement with the world. She called for building and deepening integration among trusted partners to secure supplies of critical raw materials, technologies, and products.
“Let’s do it with countries we know we can count on,” she said in a Washington speech. “Favoring the ‘friend-shoring’ of supply chains to a large number of trusted countries, so we can continue to securely extend market access, will lower the risks to our economy, as well as to our trusted trade partners.”
Yet, when it comes to working with friendly partners seeking to invest in the U.S., Washington’s message has been less than
welcoming. Amid the rise of “America First” economic nationalism, its policies have been inconsistent and muddled, even for companies from the closest allies in Europe and East Asia. Election-year politics have further complicated its stance, casting in doubt the fate of a high-profile pursuit of U.S. Steel by Japan’s top steel maker.
President Biden wants to strengthen American manufacturing. Foreign investors can help speed it up. They have for decades created more jobs, paid higher wages and spent more on factories and equipment than the average U.S. manufacturer. Their spending on research and development has enhanced productivity and accelerated America’s strong innovation.
America’s manufacturing is already starting to benefit as companies from allied nations take up Yellen’s concept and “friend-shore” some of their production to the U.S. Amid growing U.S.-China tensions, South Korea’s LG Energy is building an EV battery plant with Hyundai Motor in Georgia and another with Honda in Ohio, while BMW is adding EV assembly lines to its South Carolina plant. Multi-billion-dollar semiconductor factories are under construction by Samsung in Texas and Taiwan Semiconductor Manufacturing in Arizona.
Yet, after hitting a record $440 billion in 2015, annual flows of foreign direct investment into the U.S. fell sharply — declines economists attribute to technical changes in corporate accounting strategies, as well as a protectionist turn in U.S. trade policy brought by former President Trump.
The pandemic then further lowered inflows. Between 2016 and 2023, the annual value of FDI averaged $256 billion. Investment flows have been helped by Washington’s efforts to bolster green technology and semiconductor manufacturing, but overall fell 28% in 2023 to $145 billion.
With the right set of policies, America can go a long way toward bolstering its domestic economy while strengthening its ties to close allies. To maintain strong alliances, the U.S. must not just talk, but show them it has their back.
FACT: Arctic sea ice cover is down by 3.2 million square kilometers — an expanse of water as big as India — since 2000.
THE NUMBERS: Carbon dioxide emissions intensity in 2023, in grams per $1 of GDP* –
Country
Value
Iran
54
China
42
Russia
36
Saudi Arabia
34
Canada
26
World Total
24
India
23
United States
19
Indonesia
17
Japan
16
European Union
10
United Kingdom
8
Sweden**
5
Ireland**
5
Singapore**
5
Switzerland**
5
Source: EDGAR, the EU’s “Emissions Database for Global Atmospheric Research”
** A 4-way tie for lowest emissions intensity rate among major economies.
WHAT THEY MEAN:
The Arctic sea ice expands and contracts like a lung, growing through autumn and winter to a late-March peak, then shrinking back over the summer to a mid-September “minimum.” The 2024 minimum is likely this week. Reviewing their 46 years of data, the National Snow and Ice Data Center in Colorado concludes that it will be the fourth-smallest on record:
“With the waning of sunlight, the pace of sea ice loss in the Arctic is slowing, and the seasonal minimum is expected in mid-September. While a new record low is highly unlikely, extent at the beginning of September is below many recent years. Both the northern and southern Northwest Passage routes have largely cleared of ice, as has the Northern Sea Route. … Antarctic ice extent is approaching its seasonal maximum and is near last year’s record low. Arctic sea ice extent as of August 31 was 4.55 million square kilometers (1.76 million square miles), fourth lowest in the 46-year passive microwave record for that date.”
NSDIC says Arctic ice cover has contracted by about 10% per decade since the millennium. The cumulative loss of ice, averaged over a full year, comes to 3.2 million square kilometers — a space of water about as big as India — and means ice coverage is down about 40% from the 8 million square kms typical of the 1980s. The ice is also (a) thinner — now mostly 2 to 3 meters from top to seawater, which is about half the 5-meter average Norwegian polar explorer Fridtjof Nansen found on his first-ever Arctic ice transit in 1893 — and (b) younger. In the 1980s, “old” ice four years old or more made up about a third of polar ice volume, and “new” ice less than one year old likewise a third; this decade, about 5% of ice is “old” and 70% “new.”
The diminished polar ice cap is an especially visible reminder that governments and industries have limited time to think and argue. Moving from ice to emissions, statistics from the EU’s EDGAR database — updated Thursday for 2023 emission totals, a day after the NSIDC published its 2024 Arctic minimum estimate — suggest three things. One, worldwide, the “battle” to contain climate change, if “battle” is the right metaphor, is being lost. Two, it’s being lost mostly in large middle-come countries – though carbon emissions from rich countries are now falling, those from China in particular, and also India and some other big countries, more than offset these drops; and three, the “battle” isn’t lost yet. Here’s a summary:
Totals: The number that counts for ice, forests, corals, northern mammals, sea life, arable land, and coastal community safety is the level of greenhouse gases in the atmosphere. Here the annual human contribution continues to rise. In 2000, human carbon dioxide emissions came to 25.2 billion tons. The 2023 total was 39.0 billion tons, meaning annual CO2 emissions are up 50% so far this century. Alternatively, since 2020 (an unusually low year because of the COVID pandemic), carbon emissions are up by 2.9 billion tons, or 8%.
Emission by country: Within this big emissions total, smaller country-by-country shares (based on territorial output) have sharply changed. The “developed” world — the U.S. and Canada; the EU, the U.K., Switzerland, Norway, and Iceland; Japan, Taiwan, and Korea; Israel; Australia and New Zealand — has cut annual carbon dioxide emissions by 2.5 billion tons since 2000. Though they are still far from “net zero,” they are trending down at an accelerating pace. Annual CO2 emissions from the rest of the world, though, are up 16 billion tons, including by 9.6 billion tons in China, 2.0 billion tons in India, and about 4.0 billion tons elsewhere. In sum, the growth of Chinese and middle-income country emissions has far outdistanced the “developed” countries’ reduction.
“Emissions intensity”: Against this overall growth of emissions, trends in emissions “intensity”– that is, the amount of carbon produced per dollar of output — offer some reason for guarded optimism. The United States and Europe have not cut emissions by getting poorer but by growing more efficient. In 2000, Americans produced 38 grams of carbon for each dollar of (real, inflation-adjusted) GDP, and EU countries 21 grams. By 2023, the U.S. was down to 19 grams per dollar, and the EU to 10, and the world’s most carbon-efficient economies suggest that there’s still a lot of room to improve. The U.K. and France are at 8 grams of carbon per dollar, Denmark 6 grams, and Sweden, Ireland, Singapore, and Switzerland set the world standard at 5 grams.
This positive trend isn’t unique to the wealthy world: Chinese emissions intensity is down 44% – from 73 grams per dollar in 2000 to a still-high 42 last year since 2000 — and India’s by 24%. In only three of the top 20 emissions sources — Iran, Saudi Arabia, and Vietnam — has intensity grown since 2000. Here’s a table summarizing emissions from the largest country sources, including total CO2 emissions in 2023, change in this total since 2000, and change in emissions intensity since 2023, with positive trends colored green and negative ones red:
Country
2023 Emissions (billion tons)
Change 2000-2023
Emissions/GDP ratio change since 2000
World
39.0
+13.3 billion tons
-27%
China
13.3
+9.6
-44%
United States
4.7
-1.2
-50%
India
3.0
+2.0
-24%
EU
2.5
-0.9
-52%
Russia
2.0
+0.4
-36%
Japan
0.9
-0.3
-36%
Iran
0.8
+0.4
+10%
Indonesia
0.7
+0.4
-26%
All other
8.1
-0.2
-44%**
* Using EDGAR data released last week. Other estimates, such as those by IEA, differ slightly but not fundamentally.
** Not available in EDGAR; PPI estimate using World Bank GDP data.
Final point: The Ireland/Singapore/Sweden/Switzerland 5-grams-per-dollar intensity standard is much better than any very large emissions source country has achieved. But their diverse economic mix — Ireland and Singapore with lots of high-end manufacturing and big computer servers; Sweden, Switzerland, and Ireland with big farm and livestock sectors; Sweden with its six auto plants; Switzerland and Singapore as services and logistical centers — suggests that bigger countries should be able to match their record. Had the world’s top 8 emissions sources done so, their emissions would have been 5.8 billion tons rather than 28 billion tons last year, and as a group, they would have been 80% of the way to net zero. So, that’s not an impossible goal, or even an unrealistic one. The ice bulletins say clearly that the ‘battle’ isn’t now being won. But it isn’t yet lost.
German scientist Markus Rex recounts the two-year “MOSAIC” mission, in which a specially equipped icebreaker sealed itself into the Arctic ice in 2022 north of Svalbard, and came out on the other side near Greenland two years later.
Fridtjof Nansen’s wooden Fram did the same thing in the first successful Arctic Ocean research and survey mission, from 1893 to 1896. The Fram bogged down (though it was later recovered); Nansen, after making the first estimates of Arctic ice thickness, ocean depth, and wildlife diversity, got to Greenland by sled and kayak.
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
FACT: Trump-era tariffs raised prices but did not ‘bring manufacturing back’.
THE NUMBERS: Manufacturing share of U.S. GDP –
Year
Percentage
2023
10.3%
2020
10.1%
2016
10.9%
WHAT THEY MEAN:
Here’s Vice Presidential candidate Senator J.D. Vance, pitching higher tariffs in late July and saying no price for toasters would be too high. And there was the same Mr. Vance, a week earlier, denouncing high prices and their toll on middle-class family budgets: “Many of the people that I grew up with can’t afford to pay more for groceries, more for gas, more for rent.”
Visionary poets like Walt Whitman can get away with this sort of thing. (Song of Myself, verse 51: “Do I contradict myself? Very well, I contradict myself. (I am large, I contain multitudes.)”.) Politicians struggle. Challenged in a TV interview a few days later, Vance tries hard to have it both ways, with a claim about earlier Trump-era tariffs:
“[M]anufacturing came back and prices went down for American citizens. They went up for the Chinese but went down for our people.”
Is he right? In fact, manufacturing growth slowed down while prices went up. The two main Trump-era tariffs went onto steel and aluminum in March 2018 (“Section 232”), and most Chinese-made goods (“Section 301”) — though toasters were exempted — in three pulses from September 2018 to mid-2019. Overall, this raised average “trade-weighted” U.S. tariff rates from 1.4% to 3.0% as of 2019. Since then, the figure has dropped back to 2.4%, as some purchasing shifted from China to Vietnam and other countries. Here’s the price and output data afterward:
Prices: The U.S. International Trade Commission’s 2023 report on the Trump-era tariffs is the standard source here. It finds prices up for families buying consumer goods and also up for manufacturers, construction firms, and others buying metal. The representative quotes:
Steel and aluminum(pg. 124): “The increase in tariffs on steel and aluminum imports increased the relative price of imports and led consumers of steel and aluminum to increase sourcing from domestic suppliers. This increase in demand for domestic production of steel and aluminum resulted in increases in the price of domestically produced steel and aluminum and the quantity of domestic steel and aluminum production in these industries. However, the higher prices of steel and aluminum translated into higher costs of production inputs for downstream industries. This effect negatively impacted the downstream industries that purchase steel and aluminum because costs increase per unit of production.”
Chinese goods (pg. 145): “[T]he tariffs did not have a significant impact on the price received by Chinese exporters. On the other hand, the elasticity of the importer price with respect to the tariffs is close to one, indicating that importer prices rose about 1 to 1 in response to the tariff increase. This is consistent with the recent work of Amiti et al. (2019), Fajgelbaum et al. (2020), Carvallo et al. (2021), and Jiao et al. (2022), who also largely estimate full pass-through of recent tariff actions from exporters to importers.”
Academic literature, along with reviews by Federal Reserve staff economists, concurs. These generally converge on a finding that the tariffs raised overall U.S. prices in a range of 0.3% to 0.5%, with the highest estimate a bit above 1.0%.
Output: With respect to manufacturing trends afterward, the ITC’s report concludes that (as of 2021) the steel and aluminum tariffs had raised the two metals’ output by about $2.2 billion, and shrunk the output of auto parts, machinery, tools, and other metal-using manufacturers (including household appliances such as toasters) by about $3.5 billion. On net, therefore, an overall slight shrinking of U.S. manufacturing. (They didn’t do a similar estimate of the China tariffs’ impact on consumers and firms buying inputs.)
More broadly, the post-tariff trend has been somewhat slower growth in manufacturing output and employment, though not an overall contraction. The Commerce Department’s Bureau of Economic Analysis, which calculates U.S. GDP stats, reports that in 2017, manufacturing made up $2.1 trillion of a $19.6 trillion American economy — that is, industries making planes, cars, semiconductor chips, frozen meat, refined petroleum, medicines, plastics, etc. accounted for 10.9% of overall output just before the tariffs. By 2019, their $2.2 trillion output was 10.5% of a $2.2 trillion economy; after a sharp drop to 10.0% in 2020 during the COVID pandemic, it rebounded to 10.3% in 2023 ($2.29 trillion of a $22.38 trillion economy). So manufacturing continued to grow, but makes up a somewhat smaller part of the U.S. economy than before the Trump-era tariffs.
Alternatively, in terms of “real,” inflation-adjusted growth, U.S. manufacturing grew by $33.5 billion on average per year during the Obama presidency, measuring from the financial crisis low of 2009 to 2017. Since 2018 it has grown by $30.2 billion per year, again slightly more slowly after the tariffs than before.
Employment: The employment story is similar – a slowdown in net manufacturing job creation, and a somewhat smaller share of total employment. According to the Bureau of Labor Statistics, in July of 2017, manufacturers employed 12.5 million of 146.8 working Americans, or 8.5% of all jobs. As of July 2024, the figure is 13.0 million of 158.7 million jobs, or 8.2%. Alternatively, again looking back to the Obama era, from the financial crisis low in mid-2009 to mid-2017, manufacturers added a net of 795,000 jobs. This was an average net gain of 99,500 jobs per year. Since mid-2017, they’ve added another 480,000, for 68,600 jobs per year. Or, in terms of wages, BLS’ stats find manufacturing workers earning about 27 cents more per hour than the national average in 2017 (a 1.0% advantage), and 29 cents per hour less (a 1.0% disadvantage) by 2021.
So: A lot goes into these big numbers – economic shocks and booms, career choices of young workers, innovation and adaptation of new technologies, etc. But the overall data from BEA and BLS make ITC’s conclusion that the 2018/19 tariffs raised prices and slightly shrank U.S. manufacturing look pretty strong. Vance’s backward-looking claims of ‘lower prices’ and ‘coming back’ don’t hold up. You can, however, be pretty confident about his promise that with an added tariff of 10% or 20%, toasters – along with other home appliances, groceries, gas, TV sets, refrigerators, cars, medicine, toothpaste, and consumer goods generally – will cost more.
Vance’s toaster-price rhetoric appears to have contaminated the kitchen-appliance Internet with a moldy spread of opportunistic ‘made-in-USA toaster’ false positives. Discarding these, our search finds that no small home pop-up toasters appear to be made in the United States at the moment. U.S. factories do, however, produce kitchen and other home appliances – according to BLS, about 61,500 people work in appliance production – and several firms (e.g. Tennessee-based Holman Star) make big conveyor-type toasters for restaurants and hotels. They sell for $1,000 and up. Alternatively, the UK’s Dualit makes its “Classic” line by hand in Sussex, starting at £170 (=$222).
BLS on home-appliance industry employment and pay.
And tariffs appear to be making it harder, not easier, to make these things here. From the political right, National Review’s Dominic Pino reports on toasters and American kitchen appliance-makers’ unhappy experience with Trump-era metals tariffs.
Companies hurt by the tariffs could sue Trump if he uses IEEPA, but they’re unlikely to find a judge that would issue an injunction to stop the order from going into force and the lawsuit itself could take years to resolve, said Everett Eissenstat, a former Trump White House official who now is a partner at Squire Patton Boggs.
Still, Trump’s action under the law may be easier to challenge legally if he uses the growing U.S. trade deficit as justification for urgent tariff action. The United States has run a trade deficit every year since 1975, making it hard to claim the current trade deficit is an emergency, said Ed Gresser, a former USTR official now at the Progressive Policy Institute, a Democratic think tank.
The U.S. economy has quadrupled in size over the past five decades to more than $22 trillion and employment has doubled to 158 million jobs even though the trade deficit has increased, Gresser added. And while the dollar value of the trade deficit has hit record highs in the range of $1 trillion annually, the trade gap actually has declined as a percentage of U.S. gross domestic product from the peak level of 5.7 percent in the mid-2000s to 2.9 percent in 2023.
FACT: World infant mortality rate cut by half since 2000; in the U.S., by only 22%.
THE NUMBERS: Infant mortality rates, 2000-2022* –
Country
2000
2022
Decline
Sierra Leone (highest rate 2022)
138.3
76.0
-45%
Estonia (lowest rate 2022)
8.7
1.5
-83%
Least-developed countries
108.6
42.3
-61%
World
53.0
27.9
-47%
High-income countries
6.9
4.1
-41%
United States
7.1
5.6
-22%
Deaths in the first year of life, per thousand live births. World Bank for world and regions; CDC’s most recent release for the U.S. rate in 2022. Note that the CDC has recalculated the U.S.’ 2000 figure to 6.9 per 1000.
WHAT THEY MEAN:
“Natalism,” the view that governments should encourage people to have children, can come in modest and supportive forms: child tax credits, cash subsidies for child care, and so on. Few are extremely successful. More exotic approaches — e.g. Vice Presidential candidate Vance’s haranguing of childless couples as in some way letting down the country — aren’t at all likely to do better. An alternative suggestion: improve the protection of children once they’re born. Here a remarkable 21st-century international success — a sharp drop in infant mortality almost everywhere, fastest on average in poorer countries but also clear in Europe, Australia, and Japan — highlights an area where Americans should do better. The background and the contrast:
20th-century success: In the very long view, American infant mortality has declined drastically — by 99.4% — since 1915, when the Labor Department’s newly formed Children’s Bureau first estimated a national infant mortality rate. Their statisticians found 99.9 deaths in the first year of life per every 1,000 births that year, for a 10% infant mortality rate. Earlier rates were likely even higher — Michigan’s health department, for example, reported 15.7% state infant mortality in 1900 — and the Bureau believed 30% of all deaths in the U.S. were of children five years or younger. To put these figures in perspective, the death rate for soldiers in the Union Army was 13.4%; and according to World Bank tables, the highest national infant mortality rates today are Sierra Leone’s 76 per 1,000 and the Central African Republic’s 74. Or, to move from data to family life, early childhood death was common, and neither power and wealth, nor education, nor medical education seem to have been defenses: three of Abraham and Mary Lincoln’s four children died young, as did four of Karl and Jenny Marx’s seven, three of Louis and Marie Pasteur’s five, and two of Charles and Emma Darwin’s ten.
The causes were fairly simple: (a) bad sanitation, especially contaminated milk and water; (b) no vaccines, anti-inflammatory medicines, or antibiotics; and (c) poor or non-existent primary health care. Over the next decades, with public health and sanitation laws, new medicines, vaccination campaigns, Medicaid insurance for the poor, and other policy innovations, the figures collected by the Children’s Bureau and its successors at the Centers for Disease Control steadily improved: 60 deaths per thousand births by 1930, 40 by 1940, 26 by 1960, 10 by 1980, and 7.1 (since recalculated to 6.9) as CDC published its “Achievements in Public Health ” retrospective in 2000.
But more recently: Placed against this 20th-century achievement, the U.S.’ 21st-century record looks mediocre at best. CDC’s most recent calculation of the national infant mortality rate (for 2022, out in late July) is 5.6 deaths per 1,000 births. This is 22% below the rate of 2000 and actually up from 5.4 deaths in 2021 – the largest jump in 20 years.
Meanwhile, the rest of the world has cut infant mortality by nearly half. It’s tempting to put the relatively poor U.S. performance in a good light by noting that the high worldwide rate reflects remarkable successes in lower-income countries, and/or assuming that public health policy might have a diminishing rate of return, with infant mortality reduction slowing naturally as rates fall and at some point stopping.
The first of these points is true. Most of the low- and middle-income world has cut infant and childhood deaths deeply and fast since 2000. Uzbekistan, for example, has cut infant mortality by 77% since 2000, Cambodia by 76%, Armenia and Morocco by 66%, Bangladesh by 62%, Ethiopia 61%, Egypt 59%, El Salvador 57%, Indonesia 56%, Honduras 55%, Timor-Leste 53%, and Ghana 51%. But the second isn’t. The U.S.’ rate was near the ‘developed’-world average in 2000, is now clearly higher, and has fallen more slowly than most. As an example, Japan’s 3.2 per 1000 rate was the world’s lowest in 2000, and has fallen at exactly the world average rate to 1.7 per 1000. A representative table of large and advanced economies:
Country
2022 Infant Mortality Rate
Drop since 2000
China
4.8
-84%
Australia
3.2
-63%
Korea
2.5
-63%
Ireland
2.7
-60%
India
25.5
-62%
Italy
2.2
-53%
World
27.9
-47%
Japan
1.7
-48%
Spain
2.5
-43%
United Kingdom
3.6
-39%
Germany
3.0
-32%
United States
5.6
-22%
France
3.3
-19%
Canada
4.3
-19%
What explains this? And what might be done?
One explanation comes from internal disparities: differing experiences by geography, by race, and ethnicity, and differing rates of change over time. Some comparisons:
* State and region: By state, Massachusetts has the lowest U.S. infant mortality rate at 3.2 per 100 births; Mississippi’s 9.1 per thousand is the highest. By region, rates in New England, the mid-Atlantic, and the West Coast are well below the national averages and within a standard rich-country range. Rates in the deep South and Vance’s Ohio-Indiana-West Virginia region are typically above 7 per thousand.
* Race and ethnicity: Infant mortality rates range from 3.7 per thousand in Asian American families through 4.4 in non-Hispanic white families, 4.8 in Hispanic families, 7.5 in Native American, and 10.6 in African American families.
* Change over time: By race and ethnicity, declines over time are not vastly different. Regionally, however, some parts of the country have cut infant mortality noticeably faster than others. The best state record since 2000 is the District of Columbia’s 60% reduction, followed by drops of 45% in New Jersey and North Dakota, 39% in Rhode Island, 36% in Massachusetts, and 35% in New Hampshire. Recent studies suggest a couple of commonalities in the latter group. One is non-participation in the Affordable Care Act’s Medicaid expansion, which improved access to prenatal and maternal care for lower-income moms. Another is the imposition of abortion restrictions since the Supreme Court overturned Roe v. Wade in 2022, often vaguely written and applicable to many different situations, which may be both keeping patients from seeking care and deterring providers from working in the relevant areas.
Perhaps related to both of these themes is an ominous trend in rural health care: maternity care seems to be getting steadily harder to find, and both expectant mothers and infants therefore face rising risk. Health consultancy Chartis summarizes:
“More than 400 maternity programs closed nationwide between 2006 and 2020. In rural communities, the disappearance of OB services has been particularly impactful. Between 2011 and 2021, 267 rural hospitals closed OB services, representing 25% of all rural OB units in the United States.”
To put these figures in context, there are 2,168 maternity hospitals in the United States. So at least in remote areas, health care options are fewer and further away than they were a generation ago. And bringing this from policy and data to family life, the CDC reports 20,577 infant deaths in 2022. Had the U.S. achieved Japan’s world-standard 1.7 per thousand infant mortality rate, 14,300 of them would have lived. The EU’s 3.1 per thousand rate — which is certainly possible, since it’s not far away from the New England average — would have kept 9,200 alive.
So: For those wanting more American children, Vance’s “browbeating” approach is pretty certainly useless, and more prosaic things — child tax credits and child care support, better access to prenatal and perinatal care, primary health in general, “keeping clinics open in places where they’re closing” — are good ideas. We can, really, do a lot better.
… and a study looking at Medicaid expansion, post-Dobbs abortion restrictions, and changes in infant mortality rates.
World perspective –
The World Bank has rates for 1990, 2000, and 2014 through 2022 across all countries and for regions and income groups.
… and a sample of its data:
Country
2000
2022
Decline
China
29.9
4.8
-84%
Estonia
8.7
1.5
-82%
Uzbekistan
51.4
11.9
-77%
Mongolia
48.4
11.5
-76%
Turkey
30.9
8.5
-73%
Cambodia
79.0
22.3
-72%
Armenia
27.0
9.2
-66%
Australia
5.1
3.2
-63%
Bangladesh
63.0
24.1
-62%
Least-developed countries
108.6
42.3
-61%
Ethiopia
87.4
33.9
-61%
El Salvador
24.6
10.5
-57%
Indonesia
40.9
18.1
-56%
Honduras
30.5
13.8
-55%
Ireland
6.0
2.7
-55%
Italy
4.7
2.2
-53%
Timor-Leste
87.3
41.5
-53%
Mexico
23.6
11.5
-51%
Japan
3.3
1.7
-48%
European Union
5.9
3.1
-47%
World
53.0
27.9
-47%
Jordan
22.6
12.2
-46%
Sierra Leone
138.6
76.0
-45%
High-income countries
6.9
4.1
-41%
United States
7.1
5.6
-24%
Canada
5.3
4.3
-19%
Jamaica
17.5
16.1
-8%
Success stories –
In 2000, the capital’s infant mortality rate, at 13.5 deaths per 1,000 births, was nearly twice the national average. As of 2022, it was 5.5, down by 60% and equal to the national average. Mayor Bowser’s health division, with links to perinatal and infant health services and reporting.
UNICEF looks at newborn health care in Uzbekistan.
* San Francisco Fed, Peterson Institute
** Initial proposal was a 10% tariff worldwide and a 60% tariff on Chinese-made goods; more recently campaign has suggested 20% worldwide and 60% on Chinese-made goods. Cost estimates from the Tax Policy Center, Peterson Institute, Center for American Progress
WHAT THEY MEAN:
From Through the Looking-Glass, Chapter 5:
“Alice laughed. ‘There’s no use trying,’ she said. ‘One can’t believe impossible things.’
“‘I daresay you haven’t had much practice,’ said the Queen. ‘When I was your age, I always did it for half an hour a day.
Why, sometimes I’ve believed as many as six impossible things before breakfast.’”
In the Queen’s spirit, the Trump campaign’s 10-chapter, 5,398-word, platform starts with a pledge to “defeat inflation and quickly bring down all prices” in Chapter 1, and then — four notches down in its own Chapter 5 — says this on trade policy:
“Trade deficit in goods has grown to over $1 Trillion Dollars a year. Republicans will support baseline Tariffs on Foreign-made goods, pass the Trump Reciprocal Trade Act, and respond to unfair Trading practices. … By protecting American Workers from unfair Foreign Competition and unleashing American Energy, Republicans will restore American Manufacturing, creating Jobs, Wealth, and Investment.”
The weird grammar and “Mad Hatter” orthography makes the passage a bit hard to read. Converted from argot to standard English, it promises a lower trade deficit and a larger manufacturing sector, plus a couple of policies that ostensibly will get these things. One, the cryptic allusion to a “Reciprocal Trade Act” can be ignored; it’s a concept pitched by Peter Navarro in the Heritage Foundation’s Project 2025 book, and unworkable in practice. (Precis below for those curious about this particular rabbit-hole.) The other, the “baseline tariff,” has been defined in campaign comments as a 10% tax (or more recently a 20% tax) on all imported products — shoes, over-the-counter medicine, groceries, tea, auto parts, toasters, etc. — plus a 60% tariff on all Chinese-made goods. VP Harris, channeling straight-ahead thinker Alice in her North Carolina talk last Friday, summarizes the idea as follows:
“A national sales tax on everyday products and basic necessities that we import from other countries. … It will mean higher prices on just about every one of your daily needs: a Trump tax on gas, a Trump tax on food, a Trump tax on clothing, a Trump tax on over-the-counter medication.”
Here’s a small but important first-aid example:
The current U.S. tariff on band-aids and similar bandages is zero. (Termed “adhesive dressings and other articles having adhesive layers” in the Harmonized Tariff Schedule; HTS Chapter 30, lines 30051010 and 30051050.) Americans spend about $3 billion dollars a year on them, buying some locally and some from abroad. Trade data report $893 million spent on band-aid imports last year, with Europe and the U.K. supplying $299 million worth, China $263 million, Mexico $142 million, other Latin American countries (mainly Brazil and the Dominican Republic) $88 million, and other countries the remaining $140 million. At face value, raising the U.S. tariff rate from zero to 10% for the European/Latin/etc. bandages, and to 60% on the Chinese, would add another $220 million in costs. A 20%/60% variant would be $285 million. In practice, some or most Chinese products would likely shift to other production sites, so the direct cost to Americans would be a bit less. U.S.-based producers, though, would presumably start charging more. Families’ and clinics’ bandage bills would then rise, probably by 6% to 10% (that is, $150 million to $300 million in extra costs), depending on how sharply imports from China shrank.
A larger 10% or 20% tariff across all industries, applied to industrial inputs as well as consumer goods, will have larger and more complex price effects — since about a third of U.S. inputs are ‘intermediate goods’ used by manufacturers and farmers, it would raise U.S. production costs as well as consumer bills — but the basic one is higher prices. How much? The first Trump administration’s tariffs (on metals, at 25% for steel and 10% for aluminum, and 25% or 7.5% on about $350 billion worth of Chinese-made goods), raised overall U.S. tariff rates from a 1.4% average to 3.0%. Analyses by San Francisco Fed economists and others suggest this likely contributed about half a percentage point to inflation. Three nonprofit studies this spring and summer, using the 10% worldwide tariff — Peterson Institute for International Economics, Center for American Progress, and most recently the Tax Policy Center — expect it would raise families’ bills for goods by $1,500 to $1,820. This would add 6% to 8% to the roughly $23,000 an average household now spends on food, appliances, clothes, gasoline, and other goods.
As to whether you can do both Chapter 5’s promise of higher tariffs and prices, and Chapter 1’s promise to “bring down all prices” (setting aside whether the methods proposed for either one are credible): trust Alice, not the Queen.
As a policy, Chapter 5 works directly against Chapter 1’s “bring down prices” promise. Assuming the Trump campaign abandons Chapter 1, doesn’t worry about price hikes, and sticks with higher tariffs, how credible are its claims that theses higher tariffs would mean lower trade deficits and manufacturing growth? Lots of things beyond trade policy, of course, go into big sectoral trends like this. But experience from the first Trump administration’s 2018/19 tariffs suggests “don’t count on it”.
1. Trade Balance: Each February the U.S. Trade Representative Office publishes a report entitled “The President’s Trade Agenda,” explaining Administration trade goals for the coming year. The 2017 edition, the Trump administration’s first, cited a U.S. manufacturing trade balance stat to argue that its predecessors had gotten things wrong:
“In 2000, the U.S. trade deficit in manufactured goods was $317 billion. Last year [i.e. 2016] it was $648 billion — an increase of 100 percent.”
This ‘$648 billion’ is far below the “1 trillion” manufacturing deficit cited in the 2024 platform. That is because, since the 2018/19 tariff round, the U.S. trade deficit has risen sharply in general and grown more concentrated in manufacturing, which had hit $891 billion in 2020 and reached $1.06 trillion in 2021 before turning down a bit by 2023.
What happened? As an economic axiom, national goods/services trade balances equal national savings minus national investment. A tariff hike, as a form of tax increase, should reduce government “dissavings”. Unless offset by a fall in private-sector savings, it should mean a slightly lower trade deficit. If fiscally outmatched by a tax cut elsewhere, though — as in 2018 and 2019 — the trade deficit will not fall but rise. Thus, the last Trump administration drove up the trade deficit rather than cutting it as it promised. Since tariffs are a form of tax applied particularly to goods buyers and goods-using industries (e.g. retail, manufacturing, and agriculture pay a lot more when tariffs rise; financial services or real estate not so much), the higher Trump-era tariffs are likely a reason the overall deficit has become more concentrated in manufacturing and the agricultural surplus has gone. The most likely outcome, if the Chapter 5 stuff goes into effect, will be similar but larger.
2. U.S. manufacturing sector: Likewise, manufacturing growth slowed after the first set of tariffs. At 10.9% of U.S. GDP in 2018, manufacturing was down to 10.3% by 2021 and has stayed there. With respect to employment, the Bureau of Labor Statistics finds manufacturing job growth not negative but slower after the tariffs than before: about 135,000 net new jobs per year from the financial crisis low in early 2010 to the spring of 2018 just before the Trump tariffs; an average of 57,000 per month since then.
The Census has U.S. exports, imports, and balances from 1960 to 2023 on one convenient page.
And BLS’ database (use Employment, Hours and Earnings for manufacturing and other sector employment).
And down the rabbit hole:
As promised fort hose interested: The “Reciprocal Trade Act” concept, set out by Dr. Peter Navarro (a first-term Trump trade official, recently released from the Federal Corrections Institution in Miami) in essay #26 in the Heritage Foundation’s “Project 2025” book, starting on page 765.
The idea is that either “our trading partners lower their applied tariff rates on specific products to U.S. levels in cases where their applied tariffs are higher,” or if they don’t, “to uphold the principle of reciprocity, the U.S. raises its tariffs to mirror levels”. In practice, there are about 150 “tariff schedules” in the world. This is somewhat less than the count of countries and non-independent customs territories, since some countries (e.g. the 27 EU members) are in Customs Unions and use the same tariff schedule. Tariff schedules are quite long: America’s 4,392-page schedule has 11,414 different 8-digit tariff lines (setting aside the extra complexity created by anti-dumping orders, FTAs, 232 and 301 tariffs, and so forth). According to the WTO’s Tariff Profiles 2023, Somalia’s 5,469-line schedule is the shortest, and the others range up from Mozambique’s 5,549 through Nigeria’s 6,890, Switzerland’s 8,703, the EU’s 9,785, Argentina’s 10,811, the Philippines’ 10,896, and India’s 12,088, to peak at Algeria’s 16,785.
All use the same basic 96 chapters, and the same “headings” and “sub-headings” down to 6 digits, so statistical agencies know which types of goods are moving around. But at the “8-digit” level which defines tariff rates, different countries’ tariff systems vary widely. For example, New Zealand has 75 tariff lines for shoes (mostly zero or 10%), while the U.S. has 134 shoe lines from zero to variable compounds like “90 cents/pair + 37.5”. Likewise, the U.S.’ nine jam lines go from 1.4% (currant) to 3.5% (apricot) to 7.0% (peach); Norway’s eight lines (Chapter 20) mix apricots and peaches together and give them a zero, but charge 8.34 kroner/kg for blueberry jam. To make this “Act” work, Customs officials and Congressional staffers would need to write up and then administer a system in which the U.S. had not nine jam lines and 134 shoe lines, but enough — likely several thousand – to match every jam and shoe line in each of the other 150 schedules. Across the entire schedule, the number of tariff lines would likely wind up in the millions. Not going to work, no.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
“Tariffs are taxes—taxes that weigh most heavily on the poorest Americans. Protectionism is, and always has been, regressive, a fact most brutally illustrated by the tariff tables themselves, according to figures compiled by Ed Gresser of the Progressive Policy Institute.”
FACT: The ‘African Growth and Opportunity Act’ expires next year.
THE NUMBERS: U.S. imports from Africa, 2000 and 2023 –
2000
2023
Total
$22.1 billion
$29.6 billion
Crude oil
67.7%
29.3%
Unworked diamonds & precious metals
8.4%
16.9%
Ores, slag, and ash
1.8%
1.8%
All else
22.5%
52.0%
Note: Nigeria, Angola, Chad, Equatorial Guinea principally oil exporters; South Africa metals and automotive; Botswana and Namibia diamonds both cut/polished and unworked; Kenya, Ethiopia, Madagascar, Senegal, Ghana, Mauritius light manufactures, clothing, agriculture.
WHAT THEY MEAN:
The quick story of U.S.-African trade since 2000: Americans buy less African crude oil, but more clothes, cocoa paste, flowers, wigs and hair extensions, shea butter, polished diamonds, auto parts, birdseed, and branded coffee. Crossing the Atlantic eastward, meanwhile, more American-made cars and tractors, telecom equipment, chicken and computer parts.
Where to next? Looking ahead at July’s “AGOA Ministerial Conference”, the 29 participating African governments expressed three policy-speak hopes:
“An expeditious and long-term renewal,” meaning a hope Congress will extend the 24-year-old African Growth and Opportunity Act — the law from which the annual AGOA Ministerial conferences take their acronym, now 13 months away from its September 2025 expiration — for 16 years or more, to “ensure predictability and stability in trade and investment relationships.”
“Enhancing utilization,” echoing the concerns of U.S. Africa-watchers that U.S.-Africa trade remains relatively modest overall, and some eligible countries aren’t using the AGOA benefits as much as expected.
“Eligibility and reviews,” meaning worry that over-enforcement of “eligibility criteria” (on human rights, rule of law, foreign policy, economics, gender equity, and other factors) could erode AGOA’s effectiveness as long-term policy for U.S.-African trade growth and African economic development.
Background: The AGOA law, passed in the last year of the Clinton administration, and last reworked in 2015, has two core components. The first, a tariff waiver, gives duty-free status to nearly all things grown or made in participating countries. (Currently 32 of the 49 sub-Saharan African countries.) The second, a large “convening” program, holds annual Trade Minister conferences (the Washington session in July was the 20th) along with business dialogues, civil society fora, etc. The hope was to create a much larger U.S.-African economic relationship, and to shift Africa’s trade away from heavy reliance on energy and metal ore exports toward more labor-intensive and stable manufacturing and agricultural goods.
How well has it worked out? In raw dollars, U.S.-Africa trade is larger than in 2000, but not spectacularly so. Americans bought $22.2 billion worth of African* goods in 2000 and $29.6 billion in 2023. America’s own exports to Africa have grown faster — $5.9 billion in 2000, $18.2 billion last year — but aren’t very large either. And looking out from Africa the U.S.’ place in trade seems relatively smaller than it was in 2000: where that year’s $22.2 billion was about 20% of Africa’s $112 billion in exports to the world, 2023’s $29.6 billion is about 7.5% of a larger $406 billion.
These bottom lines are a bit misleading, though, because they mix volatile (and falling) oil with more stable (and growing) farm and factory goods. As U.S. oil imports from Africa have dropped from $15 billion to $9 billion, everything else — the clothes, cocoa paste, shea butter, auto parts, worked diamonds, hair extensions, etc. noted above — has jumped from $7 billion to $20 billion. So outside the big continental oil-producers Nigeria and Angola, trade data often look pretty impressive. A quick table:
IMPORT SOURCE
2000
2023
Change
Sub-Saharan Africa
$22.21 billion
$29.61 billion
+21%
Nigeria
$9.68 billion
$5.97 billion
-38%
Angola
$3.34 billion
$1.18 billion
-65%
South Africa
$4.20 billion
$13.88 billion
+220%
Ghana
$0.21 billion
$1.72 billion
+719%
Kenya
$0.11 billion
$0.89 billion
+709%
Madagascar
$0.16 billion
$0.72 billion
+350%
Botswana
$0.04 billion
$0.57 billion
+1325%
Ethiopia
$0.03 billion
$0.49 billion
+1533%
Senegal
$0.01 billion
$0.16 billion
+1500%
Thus, though China and more recently India long since overtook the U.S. as buyers of Africa’s oil and metal ores, Americans play a larger role in manufactured goods and farm products. In that sense, AGOA does seem to be fulfilling one of its main goals, and the Ministers have good reason to hope Congress will act soon to keep it going. Lots of ideas on next steps, and some background below on the Ministers’ “utilization” and “eligibility reviews” points along with some American thinking. Their Point 1, on the need for a renewal very soon, is timely and clear and doesn’t need much explanation.
* Using the “sub-Saharan” definition in AGOA — 49 countries — rather than the 55-country count of the African Union, which adds Egypt, Libya, Tunisia, Algeria, Morocco, and Western Sahara.
** Most don’t really need changes in the AGOA law, and the sad outcome of a 2020 attempt to rewrite the broader “Generalized System of Preferences” tariff waiver program for small and lower-income countries in a four-year-long lapse in the program coupled with endless arguments and tactical gambits – suggests it would be good to be cautious about big legal revision.
African Trade Ministers on AGOA renewal, via the African Union.
“Utilization”: One of AGOA’s puzzles, highlighted in the Ministers’ comment on “utilization,” is that fewer countries use its tariff waivers than the program’s designers had expected. The clothing tariff waiver, for example, provides not only duty-free status but “rules of origin” which in theory make AGOA cheaper and easier to use than U.S. free trade agreements. (Clothes are typically high-tariff products in the United States – top AGOA clothing imports such as acrylic sweaters get tariffs as high as 32%, and unlike Central American countries using the “CAFTA-DR” free trade agreement, duty-free African clothes can be made of fabric from anywhere in the world.) But only six of the 32 current AGOA countries — Ghana, Kenya, Lesotho, Madagascar, Mauritius, Tanzania — sell any substantial amount of the clothes that show up in American outlets and malls. Their $1.14 billion in clothing exports last year made up 99.6% of all AGOA clothing.
Why the relatively low use of this “centerpiece” AGOA feature? U.S. government analysis and outside observers see at least part of the reason in African policies. Some AGOA-country governments haven’t developed the implementation plans the program suggests. Some have geographical and cost disadvantages tariff benefits can’t overcome, as land-locked countries with shaky road and air connections to customers. And many have problems with port management, infrastructure quality, and import limits that raise production costs and erode competitiveness, and can be fixed at home.
Eligibility reviews: The Ministers, though, aren’t wrong to highlight “eligibility reviews” as a contributing factor. Since 2016, AGOA’s membership has shrunk from 38 countries to 32, as U.S. administration has removed countries for failure to meet program eligibility rules on rule of law, human rights, and other topics. (Eight countries on the 2016 ‘eligible’ list are gone: Burkina Faso, Cameroon, Ethiopia, Gabon, Guinea, Mali, Niger, Uganda; two others, Mauritania and the Democratic Republic of Congo, have returned.) Each decision had its own logic and legal background of course. But experience also shows that removals have costs. As a local example, Eswatini’s removal in 2014 over labor issues led to the collapse of AGOA garment trade and employment; they haven’t revived despite Eswatini’s return to the program in 2017. And in general, the Ministers are probably right to believe that this level of volatility reduces buyers’ confidence in AGOA as a long-term economic and developmental policy.
As an example, here are the January 2024 changes, with Mauritania back on the eligibility list and Gabon, Niger, and Uganda removed.
From the U.S. government:
U.S. “next-steps” ideas typically involve some way to manage “graduation” of countries reaching high-income status (as required under a different “preference” law, the Generalized System of Preferences), and seeking more reciprocal relationships with countries at higher income levels and with a more diversified industry. The Obama administration’s 2016 “Beyond AGOA”, even at eight years old, remains fresh.
And next steps:
A renewal proposal from Sen. Chris Coons (D-Dela.) and James Risch (R-Idaho).
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank ProgressiveEconomy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
