While Trump claimed that foreign companies would pay for the tariffs by being forced to cut their prices, this did not happen. This can be easily seen in the index of import prices, which was exactly the same in December of 2025 as it was a year earlier in December 2024.

Economic study after economic study said that 90% or more of the cost of the tariffs were being paid by U.S. businesses or consumers. The Trump administration finally had enough of hearing the truth, so their chief economist, Kevin Hassett, said that the authors one study (who were on the economic research staff of the New York Federal Reserve Bank) should be “disciplined.”

There are two reasons why Trumps tariffs were not able to bring back more manufacturing jobs.

If Trump’s goal was to bring back manufacturing to the United States, he needed to bring down the prices of goods and labor that manufacturing needs. Instead, he put tariffs on raw materials and intermediate goods (manufactured goods that are used to make finished products) like steel and aluminum.

Also, while Trump likes to harken back to the industrialization during the McKinley administration (1897-1901) when tariffs were high, he omits the fact that the factories of that time were filled with immigrant labor. Thus, Trump’s attempt at mass deportation and terrorizing immigrants are driving away the very workers needed to re-industrialize.

#SanJoseCA #CA #CapitalismAndEconomy #Tariffs #TradeDeficit

This is part three of a three-part interview. Click for part one and part two of this interview. Fight Back!: President Trump seems intent on risking on a trade war with China in order to narrow the U.S. trade deficit. Trump thinks the U.S. trade deficit means that the U.S. is a loser, and by bringing down the trade deficit the U.S. economy will grow by the same amount, creating jobs and income here in the U.S. What do you think?

Masao Suzuki: I think that this is wrong.

For example, let’s see what would happen if Trump were to cut imports from China by $100 billion over the next year. Instead of tariffs, he could ban the sale of Chinese-made cell phones and personal computers, which came to about $110 billion last year. Would this boost the U.S. economy by $100 billion?

It would, but only if Americans spent that $110 Billion on U.S.-made cell phones and personal computers. The fact is that U.S. cell phone manufacturers such as Apple have offshored all of their cell phone production. The same with U.S. computer manufacturers such as Dell and HP. Ironically, the only major computer company still making personal computers in the U.S. is Lenovo, a Chinese company.

Fight Back!: So what would happen instead?

Suzuki: Some Americans would turn to cell phones made in other countries. For example, the south Korean company Samsung, which is one of the world’s largest cell phone makers, assembles many of its cell phones in Vietnam. So one effect would be to increase imports from Vietnam and other cell phone exporting countries, meaning no net fall in the total U.S. trade deficit.

Others would choose to spend their money on other goods and services, although many consumer goods – clothes, shoes, TVs, electronics, etc. – are also imported. But many would just wait the year or two it would take for Apple, Samsung and other manufacturers to move their manufacturing out of China to another country, like Vietnam. So, what would happen in a year or two is that trade deficit would shift to other countries.

Fight Back!: What about in the meantime?

Suzuki: Apple has only about a week’s worth of inventory, other manufacturers a little more. So, starting in about a week, Apple runs out of cell phones and computers to sell, followed soon after by other companies. The Apple store has more than 30,000 employees in the U.S., many of who would lose their jobs while Apple scrambles to move its production out of China. Add to this the workers at other cell phone and computer companies, trucking and shipping workers.

So in the near term the impact of a ban on Chinese imports would be higher prices for cell phones and computers, and job losses. A trade war with China involving higher tariffs could have the same effect – and this is not even taking into account retaliation by China, which has already targeted U.S. soybeans and aircraft after Trump called for tariffs on $50 billion in Chinese imports.

Fight Back!: The underlying issue is that millions of manufacturing jobs, many of them unionized with decent pay and benefits, have disappeared from the U.S. in the last 20 years. If slashing the trade deficit won’t help, what would?

Suzuki: Some of the job losses in manufacturing are because of automation or other improvements in productive technology. For example, in steel the more labor-intensive open hearth production using iron ore has been largely replaced by electric arc production uses a lot less labor. In auto too, production of cars and light trucks has remained the same while employment has fallen.

But it is true that that there has been a large increase in imports of auto sedans, washing machines, etc. as U.S., European, and Japanese corporations shift production to other countries, in particular Canada and Mexico, with NAFTA. But Mexican workers have not benefitted from NAFTA nor have American workers – only the big car companies have. So dismantling so-called free trade agreements like NAFTA, whose real purpose was to ease the ability of corporations to move production and jobs in search of profits, is needed.

But it is important to recognize that manufacturing jobs are not inherently ones with good pay and benefits. It took the unionization of basic industry through massive struggle during the 1930s, and then more struggle by unionized workers following World War II, to win higher pay and benefits.

During the 1980s many labor leaders adopted the “made in the USA” slogan and targeted imports of Japanese cars. But this did not stem the decline of good union jobs as companies moved production to the non-union South and increased automation.

So, I think that what is really needed is for the labor movement to take up their most powerful weapon, the strike, and use it to fight for better pay and benefits.

#UnitedStates #MasaoSuzuki #China #tradeDeficit

This is part one of a three-part interview. Click for part two and part three of this interview. Fight Back!: Professor Suzuki, there has been a lot in the news about the Trump administration’s new tariffs and the U.S. trade deficit. How big is it really?

Masao Suzuki: Trump claims that the U.S. trade deficit with China is $500 billion. But this figure, like many by President Trump, is wrong. The actual U.S. trade deficit with China in goods is about $375 billion, meaning that the U.S. imports about $375 billion more in goods from China, like the iPhones, then China imports goods like soybeans from the U.S. But the U.S. actually has a surplus, meaning we export more to China than we import from them, in services. For example, the American-made movie Black Panther, opened in China as number one in their box office. So together the U.S. trade deficit with China was about $337 billion in 2017.

Fight Back!: That still seems like a large number.

Suzuki: Yes, it is. But the U.S. trade deficit with China is deceptive, because many of the goods that the U.S. imports from China are just assembled there, and their parts are often imported from other countries. Take for example again, the Apple iPhone. Less than 5% of the value of the iPhone is added in China, almost half comes from parts made in Japan and Germany. So what we should look at it is a country’s overall trade balance, not just the balance with one other country, which can be misleading.

Fight Back!: So how do the U.S. and China’s total trade balances look?

Suzuki: Well let me make two more important adjustments to the numbers. The first is that we should include the income that U.S. corporations and investors get from the rest of the world. For more than 100 years, U.S. corporations and wealthy individuals have been investing around the world – indeed this total foreign investment of almost $21 trillion is huge.

The second adjustment is measure this so-called “current account” balance in terms of the size of the U.S. economy. This allows for better comparison with other countries in the world, whose economies are individually all smaller than the U.S., and to look at how our balance has changed over time. The standard measure of the size of the economy is Gross Domestic Product, or GDP. GDP measures the production of goods and service during a year in a country, which is the basis for jobs and income. Last year the U.S. GDP was over $19 trillion.

Fight Back!: Whew. And?

Suzuki: The U.S. current account deficit was about 2.3% of GDP last year. While this is still a substantial number, it is only half the size that it was ten years ago in 2008. The big difference is that the U.S. used to run a huge trade deficit in petroleum products as we imported massive amounts of oil. But with the surge in domestic production, largely because of fracking, the trade deficit in oil has fallen dramatically, along with the overall U.S. current account deficit.

China, on the other hand, does have a current account surplus, based on it exporting more goods than it imports. China’s current account surplus used to be quite large – ten years ago it was seven times as large, at over 9% of GDP. But last year it was down to 1.3% of GDP – even less than what it was almost 20 years ago, before China joined the WTO [World Trade Organization]. What happened? China has made big efforts to raise people’s standard of living by encouraging more domestic consumption of goods and services, and also has emphasized a shift towards services. One factor helping this along was the large increase in the value of the Chinese currency, which makes their exports more expensive and makes it cheaper to import foreign goods and services into China. This so-called “rebalancing” of the Chinese economy has dramatically cut their current account surplus.

Fight Back!: If China’s surplus isn’t that big, which country does have a big surplus?

Suzuki: Among the world’s larger economies, Germany has the largest current account surplus, at over 8% of GDP.

Fight Back!: But we don’t hear Trump complaining about Germany’s big surplus…

Suzuki: Maybe he is just trying to be chivalrous to German Prime Minister Merkel.

Fight Back!: Ha-ha. Sorry professor, but your economics is better than your humor.

Suzuki: No problem. I’m sure that almost all my students would agree with you.

Masao Suzuki teaches economics.

#UnitedStates #MasaoSuzuki #tradeDeficit