US Trade War With China Failed to Reduce Trade Deficit, Boost Manufacturing

America’s trade war with China has garnished a considerable amount of attention over the past several years, at times even bringing the two superpowers to near Cold War escalations. However, four years into the strained relationship comprised of bitter bickering and a pandora’s box of tariffs, the Trump administration’s key objective of overturning America’s collapsing manufacturing sector has yet to be achieved.

A recent report released by consulting firm Kearney found that tariffs did not reduce America’s trade deficit with China in 2019. In fact, the overall trade balance has ballooned to record-high levels, and has only continued to climb. In August alone, the goods trade balance skyrocketed to nearly $84 billion – the highest ever, which can largely be attributed to the pandemic. Although US importers may have abstained from purchasing some of their goods from China, they have instead reverted to cheaper sources such as Mexico and Vietnam.

Certainly, the Trump’s administration 25% tariff on various Chinese goods has created significant disruptions in the global supply chain, and even slowed down manufacturing growth in China. This in turn has undoubtedly been the Achilles heel in the souring of relationships between the two countries, but if in indeed the Trump administration’s ultimate goal was to bring back manufacturing jobs to the US – then that policy goal is still far from its objective.

According to Bureau of Labour Statistics data, job growth in the manufacturing sector began to slow down in July 2018, with manufacturing production reaching its peak by December 2018. Then in early 2020, even before the pandemic reached America’s shores, a large portion of manufacturing job development had stalled out, and factories began to lay off staff. Meanwhile, the US government’s trade advisors have been arguing that the tariffs have indeed been successful in cornering Beijing into the Phase One trade deal, as well as force China over time to reduce its unfair trade practices.

Information for this briefing was found via Kearney, the US Bureau of Labour Statistics, and the US Census Bureau. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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