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What Donald Trump doesn't understand about trade

 President Trump's trade policy is simple. The consequences are not.

Transcript : Donald Trump has a very nationalistic overall worldview 0:04 that carries over into his trade policy. 0:06 “...remember that! America first! America first!" 0:09 He sees these kinds of things as very much zero-sum: in which one side wins and another side loses. 0:15 “We’ve lost our jobs like we’re a bunch of babies. 0:18 They’ve gone to other countries. 0:19 They’ve gone to Mexico. 0:20 They’ve gone to many other countries. 0:22 ...It’s all so easy, believe me. 0:25 It’s all so easy.” 0:27 But in a complex system like global trade, it’s not always easy to tell who is winning. 0:33 Trump has suggested really really really strongly that he wants to crack down on imports from Mexico. 0:39 “...and plants and factories and everything 0:41 else going into Mexico.” 0:43 ...and that has driven down the value of Mexico’s currency an enormous amount. 0:47 Ironically, making the peso cheaper makes it an even more attractive place to locate 0:52 production because it means that, in effect, Mexican workers are being paid less 0:56 and makes it harder for American factories to compete with Mexican ones. 1:01 But that’s not what Donald Trump says is going to happen. 1:03 “...but here's what happens: I will tell them, ‘You’re gonna move back, right?’ 1:08 and they are going to say ‘Yes, sir. We’re moving back to the United States. 1:12 We’re going to build our factory in the United States. 1:15 We’re not moving to Mexico and we are going to create a lot of new employment!'" 1:20 Trump blames the loss of manufacturing jobs on trade deals like NAFTA: 1:24 The North American Free Trade Agreement 1:26 that reduced barriers to trade between The US, Canada, and Mexico. 1:30 "NAFTA will tear down trade barriers between our three nations. 1:34 It will create the world's largest trade zone 1:37 and create 200,00 jobs in this country." 1:41 "We're not getting anything. 1:42 We have NAFTA, which is a total and complete disaster." 1:47 While trade deals are an easy target on the campaign trail, 1:51 they are only one part of the equation. 1:54 When you look at the really long term, you can see that manufacturing jobs have been 1:58 declining as a share of the economy very steadily for a very long time 2:06 and that tells us that, even though trade deals matter, they are not the driver of this big trend. 2:12 It’s just, over the long haul, because of automation, as economies evolve and advance, 2:18 more people work in the service sector, fewer people work in the manufacturing sector. 2:22 Trade plays a role in that, but it’s not the primary driver. 2:25 Despite this fact, it’s exactly those jobs that Trump is claiming to protect by withdrawing 2:30 from the TPP: The Trans-Pacific Partnership. 2:33 “A great thing for the American worker, what we just did.” 2:37 This particular trade deal, it was designed 2:40 to take a lot of Asian countries and bind them more closely together with The United States; 2:49 one reason countries were eager to do a trade deal with The United States, rather than with China, 2:55 is that they are closer to China and thus they are a little bit afraid of China 2:59 and they want to keep The United States invested in Asia. 3:02 If we pull out, that may leave some of these countries feeling exposed or alone 3:07 and like they need to enter into a Chinese economic orbit. 3:10 This decision means fewer cheap imports, 3:13 but it also affects the market for American exports. 3:16 One thing that's worth noting here is that farmers would've been big winners under 3:21 Trans Pacific Partnership. 3:23 In particular, I think the expectation was that the United States would be able 3:27 to export a lot more agricultural goods to Japan. 3:31 If The US has joined the TPP, American farmers would have had a stronger relationship with Japan, 3:36 the world’s fourth largest agricultural consumer. 3:39 Rural voters broke very very heavily in favor of Donald Trump, 3:43 but they may actually lose out by his sort of less trade-friendly policies. 3:50 And it just shows that the world is complicated and it’s difficult to change things. 3:55 And, you really do need to talk to expert people. 4:00 “I am a free trader one hundred percent, but we need smart people making the deals 4:05 and we don’t have smart people making the deals.” 4:07 Trump’s view is that for us to win at trade somebody else has to be losing. 4:11 "This country is going to start winning again. 4:14 We don't win anymore." 4:17 I don't think that that is true. 4:20 If he proves me wrong, you know, I think he’ll have a great deal to brag about, but I think 4:24 he’s going to find that, you know, the forces dragging American manufacturing employment 4:29 down are fairly profound and that the kinds of things he thinks will fix it 4:33 are just as likely to make things worse as better.

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