In a matter of minutes on Tuesday, Donald Trump set fire to 30 years of Republican orthodoxy on trade.
He ripped a pending agreement with Pacific Rim trading partners and vowed to renegotiate the long-standing accord the U.S. has had with Mexico and Canada. In his strongest campaign trade comments to date, Trump made a clear break with his party, which for decades has stood behind the business interests that supported a freer flow of goods and services across borders.
“Globalization has made the financial elite who donate to politicians very wealthy,” the presumptive Republican nominee said in a speech at a factory in Monessen, Pennsylvania. Free trade, he continued, was deliberate policy to promote development outside the U.S.
To economists, Trump is describing what has become known as the “ elephant graph,” work by Branko Milanovic of the University of Maryland School of Public Policy. The chart shows how the entire world has fared under 20 years of globalization, broken down by income. The lives of the world’s poorest have not improved much. The middle class of emerging countries has been lifted through exports. But the lives of middle classes in developed economies have not improved much, either. Even worse, they’re looking up at the world’s richest, who have done quite well.
Populist Tone
Emboldened by the Brexit backers’ win last week voting the U.K. out of the European Union, Trump struck a populist tone in appealing to voters who feel left behind by the U.S.’s integration into the world economy. Similar sentiment drove a majority of voters in the U.K. to approve last week’s referendum to leave the 28-nation EU.
Trade, said Trump, “has left millions of our workers with nothing but poverty and heartache.” Again, here, there’s some truth. Armed with data since China entered the World Trade Organization, economists David Autor, David Dorn and Gordon Hanson have been able to show in several papers that, even as trade creates economic growth overall, it leaves pockets of devastation -- towns like Providence, Rhode Island, that used to make the things that China now makes.
The remarks represent a shift in Trump’s thinking. Three years ago, he touted the benefits of an open global economy.
Thinking Shifts
"We will have to leave borders behind and go for global unity when it comes to financial stability,” Trump said in a 2013 opinion piece published by CNN. "The future of Europe, as well as the United States, depends on a cohesive global economy. All of us must work toward, together toward, that very significant common goal."