President Trump in early March signed proclamations intending to impose tariffs on steel and aluminum imports from certain countries. Since then, the subjects of tariffs, international trade, American jobs and more have been in the news.
In this space, we’re rounding up recent research from St. Louis Fed economists on trade and manufacturing, as well as resources from economic education experts.
The goal? Explain complex issues in an accessible way.
As a recent edition of Page One Economics explained, a tariff refers to a tax imposed by a nation on an imported good. This tax increases the price of the imported good, and it can give the competing domestic good a relative price advantage.
Tariffs are among several types of trade barriers nations can employ, said authors Scott Wolla and Anna Esenther of the St. Louis Fed’s Economic Education team. Others include:
“Trade barriers, as the name might imply, are policies designed to make it more difficult to conduct international trade,” Wolla and Esenther wrote.
Check out Page One Economics, “Does International Trade Create Winners and Losers?”
In January 2017, St. Louis Fed Economist Max Dvorkin discussed his research into the impact of Chinese imports on U.S. jobs during 2000-07, a time when those imports were surging. In all, 800,000 manufacturing jobs in the U.S. were lost because of these imports, he found.
However, Dvorkin explained that a like number of jobs were created in different sectors. In addition, the cheaper imports led to an increase in buying power of $260 a year on average for every American for life, he calculated.
“I’m drawn to this subject because there are many important and exciting questions to answer,” Dvorkin said. “For example, who benefits from trade? Who loses? Are there gains or losses in the short run or in the long run? And what should we do about it?”
Listen to the Timely Topics podcast, “Chinese Imports, U.S. Jobs”
“Manufacturing has been one of the nation’s largest and most productive sectors dating back to the Industrial Revolution, and that remains true today despite a long-term decline in employment,” wrote Regional Economist Charles Gascon and Senior Research Associate Andrew Spewak in a recent Regional Economist article.
They dug into national and regional trends in the advanced manufacturing sector—industries in which research and development spending exceeds $450 per worker and at least 21 percent of jobs require a high degree of technical knowledge. Some of their findings include:
Read The Regional Economist, “Advanced Manufacturing Is Vital across Nation, Including Eighth District”
In 2017, the total U.S. trade deficit in goods and services amounted to about $568.4 billion, meaning that imports exceeded exports. In 2016, the total trade deficit was $504.8 billion. This is according to the latest data from the U.S. Bureau of Economic Analysis.
“People often assume that a surplus is good and a deficit is bad, but it is not that simple,” wrote Wolla in another issue of Page One Economics. To understand the trade deficit, he said, it’s helpful to look at the accounting of international trade.
All of our country’s transactions with the world are summarized in a balance of payments with two key components:
Wolla explained that the balance of payments must balance—a deficit in one of the accounts must be offset by a surplus in the other account. “(D)ollars that leave the U.S. to buy foreign goods, services, or assets find their way back to the U.S. economy to purchase U.S. goods, services, and assets,” he said.
Explore Page One Economics, “International Trade”
For even more on these and related subjects, see: