Chad Bown of the Peterson Institute for International Economics documents in an important new article, the Trump administration’s trade policy made the situation much worse.
When Trump took us into a trade war with China, there was clearly a lot he and his advisers failed to understand about modern world trade. Among other things, they didn’t seem to grasp that modern trade consists not of simple exchanges of goods — they sell us cars, we sell them aircraft — but of complex supply chains, in which the production of a given item often involves activities spread across the globe.
Given this reality, the structure of the Trump tariffs was, well, stupid: They focused mainly on intermediate inputs like semiconductors and capital equipment, which American companies need to compete in the world market. As a result, multiple studies have found, the tariffs actually reduced U.S. manufacturing employment.
But Trump’s trade policy wasn’t just poorly conceived. It was also erratic. Nobody knew which products might face new tariffs or whether the tariffs he had imposed would remain in place. And in high technology, especially semiconductors, Trump began imposing export restrictions, again in an erratic fashion (and with an apparent lack of awareness that, in many cases, China could simply turn to other suppliers).