So much for the new economy. Donald Trump’s path to the White House ran through a handful of old economy states whose voters are presumably now counting on the Republican president-elect to bring back all those auto, steel and coal-mining jobs that once powered their region.
What are the odds of that?
During the campaign, Mr. Trump identified the North American free-trade agreement as the main source of the Rust Belt ills. This struck a chord with working-class voters in Michigan, a state that hadn’t voted Republican in a presidential election since 1988, and which strongly backed President Barack Obama (who presided over the 2009 auto bailouts) in 2012 over native son (and auto-industry antagonist) Mitt Romney.
Of all the economic challenges facing the Rust Belt, however, free trade may be the least threatening.
Today, manufacturing accounts for 8 per cent of U.S. employment, compared to a quarter of all jobs in the 1960s. Factory output continues to increase, but manufacturing employment, at about 12.3 million in October, does not. For every manufacturing job lost to trade in recent years, eight have been lost to automation. At least free trade produces additional jobs in export-competitive sectors.
Mr. Trump can’t unwind the robot trend any more than he can reverse the geographical shift of U.S. manufacturing from Rust Belt states to southern ones with friendlier (for business) tax and labour laws. From Boeing to BMW, corporations have displayed a net preference for building greenfield factories in the South. To make their states more competitive, Republican governors in Michigan, Ohio and Wisconsin have focused on cutting taxes, not renegotiating trade deals. They’ve claimed some success, boasting lower-than-average unemployment rates.
Mr. Trump has vowed to renegotiate NAFTA, failing which he would scrap it and slap tariffs of as much as 35 per cent on Mexican goods entering the United States. Since NAFTA trade is bi- or tri-directional, increasingly so given the role of continental supply chains in North American manufacturing, this would whack U.S. exports as hard as it would imports. It would also raise prices for everything from cars to air conditioners, hurting American consumers.
Similarly, the 45-per-cent tariffs that Mr. Trump has threatened to slap on Chinese goods, especially steel, would hurt low-income Americans most without repatriating many jobs. Employment would shift to other Asian countries. But such a move would be tantamount to kicking China when it’s down, throwing an economy already plagued by slowing growth and overcapacity into a tailspin that sucks the rest of the globe down the tubes with it.
Besides, Pittsburgh will never again be the hub of the global steel industry. Nor would it want to be, having bet on more lucrative (and cleaner) technology and health-care jobs. It will take years to absorb the global steel glut, with more than 700 million tonnes of current excess capacity swishing around.
Mr. Trump promises to end the “war on coal” waged by Mr. Obama, who has proposed strict regulations to limit coal-based electricity production – mind you, their implementation has been held up by the courts. The market, not Mr. Obama, is responsible for the U.S. coal industry’s decline, as cheaper natural gas displaces coal in power production.
U.S. coal output slumped 10 per cent in 2015 and was down 20 per cent in the first 10 months of 2016. At 66,000, there are fewer U.S. coal mining jobs now than at any time since the Energy Information Administration began keeping employment records in 1978. This trend will accelerate if Mr. Trump carries through with his promise to ease fracking regulations, a move that is only likely to increase the cost advantage of natural gas over coal.
Mr. Trump might extend the life of a few coal plants by scrapping subsidies and other incentives for renewable energy – although even some Republicans in Congress might not be especially eager to grant him his wish. But it would take a lot more than that to make coal king again.
Perhaps some of the voters who backed Mr. Trump know intuitively that he can’t bring back those old economy jobs. Perhaps they’re just happy to see a politician give ‘em hell for a change, even if they recognize much of it as bluster. Unlike the news media, they don’t get hung up on the details.
“The press takes [Mr. Trump] literally, but not seriously; his supporters take him seriously, but not literally,” the Atlantic’s Salena Zito wrote insightfully in September.
So maybe it doesn’t matter to those supporters whether Mr. Trump can actually bring back the jobs. All they care about is that they’ve found a politician who takes them seriously. Maybe even literally, too.
The Globe and Mail
Published Thursday, Nov. 10, 2016 4:11PM EST
Last updated Thursday, Nov. 10, 2016 6:18PM EST