On the campaign trail, he railed against unfair trading practices and promised to renegotiate the North American Free Trade Agreement (NAFTA).
President-Elect Donald Trump in 2016? No — Barack Obama during the 2008 campaign.
“President Obama said the trade deficit with China was a problem. And he promised to get tough and do something about it, and he didn’t … We’ve had a very weak president.”
“There’s no doubt that NAFTA needs to be amended,” then-Sen. Obama said at a Democratic primary debate in Iowa in December 2007. “I’ve already said I would contact the president of Mexico and the prime minister of Canada to make sure that labor agreements are enforceable.”
Obama sounded a similar theme in a speech in Flint, Michigan, in June 2008.
“We cannot stand by while countries manipulate currencies to promote exports, creating huge imbalances in the global economy,” he said. “We cannot let foreign regulatory policies exclude American products … Put simply, we need tougher negotiators on our side of the table — to strike bargains that are good not just for Wall Street, but also for Main Street.”
So how did that turn out? Not so well. The Commerce Department reported Friday that the trade deficit in November inched up 6.8 percent from October, to $45.24 billion. That is the highest monthly figure since February.
The final figures for 2016 may show the trade deficit declined a tad from 2015, but it likely will be close to the $500.36 billion gap posted that year, up 30.4 percent from Obama’s first year in office,in 2009. Much of it derives from a massive trade imbalance with China.
“President Obama said the trade deficit with China was a problem,” said University of Maryland economics professor Peter Morici. “And he promised to get tough and do something about it, and he didn’t … We’ve had a very weak president.”
Obama promised during his 2012 re-election campaign that he would double exports in four years. As his presidency comes to an end, the fact-checking website PolitiFact rated that a broken promise. Exports in 2016 totaled $2.2 trillion. Through 11 months in 2016, they were a little more than $2 trillion.
A long-running trade surplus in services masks an even bigger problem concerning imports and exports of physical goods. The trade deficit in manufactured goods, oil, and agricultural products was $762.57 billion in 2015, the highest of Obama’s presidency. It is a stunning result, considering that cars with greater fuel efficiency and the fracking boom have triggered a roughly 45-percent drop in oil imports during Obama’s tenure.
Isolating manufactured goods, the November trade deficit of $80.75 billion brought the year-to-date total to $792.3 billion.
“We had yet another record monthly manufacturing trade deficit,” said Alan Tonelson, an economic policy analyst who writes the RealityChek blog.
Some economists argue that the trade deficit does not matter much. After all, the gap was substantially higher in 2008 and began contracting rapidly during the economic collapse. The mostly unbroken increases in the trade deficit since have coincided with years of steady — if slow — growth and a falling unemployment rate.
To Kevin Kearns, president of the U.S. Business and Industry Council, such rationalization is shortsighted and infuriating.
“There is now and has been for a long time a concerted effort to downplay the significance of the trade deficit. People who say that are in essence arguing for the status quo,” he said. “The trade-deficits-don’t-matter crowd are trying to defeat Donald Trump before he’s even started.”
[lz_table title=”U.S. Trade Balance” source=”U.S. Census Bureau”]Year,Goods,Services
The problem with a trade deficit, Kearns said, is that it has to be financed. He said that what has happened over the past couple of decades is that money spent by Americans on imports has been invested back into the United States, helping to create bubbles in sectors like technology and housing. Recessions have followed when those bubbles burst.
But Kearns said the bigger danger is that exporting countries dramatically reduce U.S. investments. That could make an economic downturn far worse.
“Certainly, there’s going to be a correction in this very long expansion … But I’m talking about a crash much worse than the Great Depression,” he said.
If the manufacturing sector continues to shrink, it will cost the United States in lost technology, Kearns said. And getting it back won’t be easy, he said. He compared it to a baseball player who takes a year off and stops working out after winning the triple crown.
“When he comes back, I guarantee he’s not going to win the triple crown,” he said.
Tonelson said large “Made in Washington” trade deficits have contributed to manufacturing job losses. The Commerce Department reported Friday that the economy added 17,000 manufacturing jobs in December, the biggest gain since January’s 18,000 increase.
Despite that bit of good news, however, 24,000 fewer Americans work in manufacturing since December 2014, and 2016 was the first full calendar year of job losses in that sector since the economy was suffering through the effects of the recession in 2009. The share of Americans employed in manufacturing — 8.45 percent of all non-farm jobs — is at an all-time low.
“The jobs figures show that the manufacturing jobs recession continues,” he said.
Tonelson said much of the private-sector growth has come from what he calls “government-subsidized” jobs. These are sectors like health care, social services, and private education — all of which depend heavily on taxpayer support.
“You want production-led growth — unless you think money grows on trees and you can keep borrowing more and more, and the sky is the limit,” he said.