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get podcast. This

1:00

is. On the media's midweek podcast, I'm

1:02

like alone jer this week on

1:04

Tuesday, a major economic policy announcement

1:07

from President Joe Biden or the

1:09

One thousand Eight Hundred Ironworkers. Their

1:11

workers and President in Ohio lost

1:13

her job. Market that happening you?

1:15

That's why today I'm announcing nutrition.

1:18

key sectors of the economy. Rouge

1:20

sure. But or workers are not

1:22

held back by unfair trade drugs.

1:25

Eighteen billion dollars in new

1:27

tariffs on Chinese imports like

1:29

electrical vehicle, semiconductors, battery steel,

1:31

and. Aluminum. The charts on electric

1:34

vehicles go from twenty five percent

1:36

to one hundred percent. He's laughing

1:38

at twenty five percent terrified steel

1:40

and aluminum. He's also adding a

1:42

fifty percent tariff on semiconductors in

1:44

this administration. Argues that will level

1:47

the playing field and protect

1:49

American businesses specifically Carmakers. These

1:51

will build on the terrorists that

1:53

former President Donald Trump put on

1:55

a slew of Chinese made goods

1:58

during his term Tariffs that. Biden

2:00

was pretty critical of in his last

2:02

campaign President Trump may think is a

2:05

been tough on China. All

2:07

that he has delivered

2:10

as a consequences that

2:12

is American farmers, manufacturing,

2:14

consumers. Losing and

2:16

Pay More from meanwhile is

2:18

on the campaign trail, threatening

2:20

to up the ante. If

2:22

he's reelected, we will say

2:25

the nicest of universal baseline

2:27

tariffs on most part. Products

2:29

On top of this, higher

2:31

tariffs will increase incrementally depending

2:33

on how much individual foreign

2:35

countries the value. Six. This

2:38

sudden love of raising terrorist is

2:41

remarkable because it's a total reversal

2:43

of a decades long consensus in

2:45

Washington in the other direction would

2:48

both republican and democratic lawmakers agreed

2:50

that lowering terrorists was the best

2:52

thing for the economy. To

2:55

understand how we got year I

2:57

spoke with Gordon Hansen's and Economists

2:59

and a Code director of the

3:01

Re Imagining the Economy projects at

3:04

Harvard University's Kennedy School. He's

3:06

done extensive research on the economic

3:08

and political impact of from terrorists.

3:11

Gordon. Welcome to the So! Thanks for

3:13

having me. Starting. And twenty

3:15

thirteen you and a team of

3:17

economists started publishing research on what

3:19

you dubbed the China Shocks. Can

3:21

you define that term? Sure.

3:24

so. China joined the global economy

3:26

in fits and starts beginning in

3:29

the Nineteen eighties, and in the

3:31

nineteen nineties as it's economy was

3:33

moving away from decades of malice

3:35

central planning, something that was more

3:38

market oriented, something pretty phenomenal happened

3:40

tighter, underwent a period of about

3:42

twenty years of economic growth, a

3:45

likes of which we've never seen.

3:47

We seen economies grow fast. We've

3:49

never seen an economy as big

3:51

as China's grow that fast. The

3:54

other thing we hadn't seen was

3:56

the country as big as China

3:59

be as specialized as a was

4:01

in a pretty narrow set of

4:03

manufacturing products. This just have ended

4:05

global markets. If you were producing

4:07

stuff that China needed to fund

4:09

it's global factories, so that would

4:12

be iron ore, that would be

4:14

copper. That would be all sorts

4:16

of primary commodities that places like

4:18

Australia and Canada and Brazil and

4:20

South Africa and Indonesia were producing.

4:22

it was Boom times. This was

4:25

just an unbelievable windfall. But if

4:27

you were producing the stuff that

4:29

China was also produce same text

4:31

and furniture and clothing and simple

4:33

electronics, it was a nightmare scenario.

4:35

All of a sudden, the world

4:38

Marcos flooded with goods. that word

4:40

the basis for your livelihood in

4:42

the Us. Regional. Economies

4:44

tended to be pretty specialized

4:46

in a handful of products.

4:49

Martinsville, Virginia, for instance, had

4:51

a half of it's working

4:53

age population employed in manufacturing

4:56

that produce basically to fangs

4:58

textiles mainly sweatshirts and furniture.

5:00

The growth of China overnight

5:03

meant just complete upheaval. In

5:05

economies like Martin Cells and other

5:08

places in the United States that

5:10

had been dedicated producing manufacture products.

5:13

And. Then enter Donald Trump and

5:15

Twenty Seventeen. I'll bring back our

5:17

jobs from China, from Mexico, from

5:19

Japan from so many places. I'll

5:22

bring back our jobs and I'll

5:24

bring back our money. How

5:26

did he aimed to counteract the

5:28

China shock. Well. Part

5:31

One of the China Shop as

5:33

the loss of manufacturing jobs am

5:35

I think what most the com

5:37

as expected at the time is

5:39

okay and vaccine declines, those workers

5:41

are just gonna redeploy and do

5:44

something else. That doing something else

5:46

never really happened and those places

5:48

found themselves mired in distress. So

5:50

when Trump was campaigning on a

5:52

message of America first and countering

5:54

the era of hyper globalization, it

5:57

resonated and parts of the world

5:59

that felt. If been punched in

6:01

the got by the global economy.

6:03

So his prescription was, well, China.

6:06

Has flooded the market with Us

6:08

goods. much put taxes on Chinese

6:10

imports and that's gonna save those

6:12

regions that had been part of

6:15

the Us manufacturing base. Yeah, he

6:17

put tariffs on solar panels and

6:19

washing machines. than. Steel.

6:21

And aluminum. and then a

6:23

twenty five percent tariff on

6:25

all kinds of goods from

6:27

China. How did Sign a

6:29

respond? China responded by putting

6:31

tariffs on the goods that

6:33

the Us exports to China?

6:35

A complicated thing here is

6:37

that a lot of what

6:39

the Us exports to China,

6:41

or services and intellectual property

6:43

and stuff that's very hard

6:45

to tax the border. We

6:47

don't export a lot of

6:49

physical goods to China. Outside

6:52

of agriculture and minerals, so what

6:54

that meant was China was left

6:56

with a pretty narrow set of

6:58

options of what the hit with

7:00

countervailing duties and that primarily sell

7:02

on the agricultural goods that are

7:04

produced in the American heartland. When.

7:07

You were watching this trade war

7:09

escalate beginning. And twenty seventeen? As

7:11

an economist, what was going through

7:13

your mind? As a public citizen,

7:15

I was concerned that the U

7:17

S was embarking on a set

7:20

of wrongheaded economic policies. As an

7:22

economist, I was fascinated. Does the

7:24

U S had spent the better

7:26

part of five decades dismantling trade

7:28

barriers, slowly moving towards an ever

7:31

more globalized world, and from one

7:33

day it of the next basically

7:35

Trump had up ended. That situation

7:37

and moved us towards much fire

7:39

trade barriers and that meant are

7:41

adoption in international trade And so

7:43

we were just waiting for the

7:45

data the come out so that

7:47

we could began to track what

7:49

was the impact of Trump's trade

7:52

protection. Yes, He did this all

7:54

ostensibly to bring back manufacturing jobs two

7:56

parts of the country that had lost

7:58

them and had once been. Quite

8:00

relying on this kind of work.

8:02

did the trade war have that

8:04

effect? Did it help American workers?

8:06

It did not. We took a

8:08

very close look at the data.

8:10

This is work I did with

8:12

on a back David Autor and

8:14

David Dorn fracking all the goods

8:16

that the Us imports from all

8:18

countries in the world out of

8:20

highly desegregated level. and then we

8:22

match those goods to where they

8:24

were produced in the United States.

8:26

To say we'll have to us

8:29

now has increased tariffs. On say,

8:31

sweatshirts are the places that were producing

8:33

sweatshirts. Now going to start producing them

8:35

again. And we tracked as from Twenty

8:37

eighteen when the terrorists really started to

8:40

bite through Twenty Nine teams and all

8:42

the way out to Twenty Twenty Two,

8:44

which at the time was as far

8:46

as we could push the data and

8:49

what we found in terms of impacts

8:51

on us. Manufacturing employment was kind of

8:53

a big nothing. There was really no

8:55

change in employment in response to those

8:58

terrorists. Do we have any good data?

9:00

On how. These.

9:02

From and now Biden Terrorists has

9:05

impacted the price of goods. Here's.

9:07

The wild thing about that Trump

9:10

terrorists? The first evidence we saw

9:12

their impacts was really shocking. It

9:15

showed that tariffs lead for a

9:17

one to one increase in prices

9:19

as those goods for entering the

9:22

United States, that meant that a

9:24

twenty five percent tariff would mean

9:26

that prices were twenty five percent

9:29

fire. And we first documented that

9:31

in looking at wholesale prices of

9:33

goods as those goods went from

9:36

wholesalers to retailers, the retailers. Eight

9:38

part of that margin. And so

9:40

the price increases that were passed

9:42

on American consumers weren't the full

9:44

twenty five percent, but they were

9:46

a pretty good chunk of it.

9:49

We haven't actually lived through this

9:51

sort of experiment in a very

9:53

long time Because tariffs have been

9:55

coming down, it's not going up,

9:57

and so it was the first

9:59

opportunity we. Had in the better

10:01

part of half a century

10:03

to examine how to terrorist

10:05

change prices for American consumers

10:07

and. Surprise. Surprise you

10:09

raise prices on imported goods?

10:12

You're raising prices for American

10:14

households. So. He. Didn't exactly

10:16

work. Flights. Politically.

10:19

It's not clear that the trade

10:21

war hurt from in fact you

10:23

found maybe it helped them. He

10:26

did So We we also tracked

10:28

what was happening in the U

10:30

S. electorally, looking at the Twenty

10:32

eighteen Congressional elections, looking at the

10:34

Twenty Twenty Presidential elections when they

10:36

to keep in mind is it

10:38

you don't the minds of American

10:41

public they're not thinking of econometric

10:43

analysis of how changes in import

10:45

taxes filter through impacts on imports

10:47

and production and employment and turn

10:49

in the changes in manufacturing jobs

10:51

in one county or another, They're

10:53

looking for a symbolic representation of

10:55

somebody. Who's got their side? So Top

10:58

had a pretty strong message to say,

11:00

which was for the last forty or

11:02

fifty years American presidents have been lowering

11:04

trade barriers, allowing cheap imports any the

11:07

United States. That has led to a

11:09

reduction in manufacturing employment and I am

11:11

here to turn all about around. I've

11:13

got your back. Safe

11:20

and if you want a President who

11:22

defends the dreams of workers in Dayton

11:25

an actor is wrong or so I

11:27

own. A Martin said you need to

11:29

get out and vote for Trump and

11:31

that message resonated as far as we

11:33

can tell he didn't get a huge

11:35

electoral bump out of us. The increase

11:38

in the vote share forth from we

11:40

estimated out of the terrorists that he

11:42

point in place was about point seven

11:44

percentage points. For. That's less than

11:46

one percentage point, however, and

11:48

a closely contested election that

11:50

was decided by a few

11:52

tens of thousands of votes.

11:54

Small impacts could have big

11:56

national a. We. Don't

11:59

know that those terrorists or the

12:01

deciding factor at they did help

12:03

help things in Trump's direction. In.

12:05

The conclusion of your paper you

12:08

write that quote the net effect

12:10

of import tariffs, retaliatory tariffs and

12:12

farm subsidies unemployment in locations. Exposed.

12:15

To the trade, War was at best a

12:17

loss and it may have been. Mildly.

12:20

Negative, but residents of Terror of

12:22

protected locations became less likely to

12:24

identify as Democrats and more likely

12:26

to vote for Trump. Why

12:29

do you think that happened? Will. Again, it

12:31

was effective messaging the workers in

12:33

America's heartland. It I know Midwestern

12:36

states that had been part of

12:38

America as manufacturing base going back

12:40

decades felt betrayed when in the

12:42

Nineteen Nineties, President Clinton signed the

12:45

North American Free Trade Agreement. The

12:47

United States must seek nothing less.

12:50

Than. A new trading system that

12:52

benefits all nations for robust commerce.

12:55

But. That protects our middle class and gives

12:57

other nations a chance to grow on.

13:00

That. List Workers and the Environment

13:02

up. Without. Dragging People

13:04

down. This is parts the

13:06

United States that had been

13:08

reliably democratic and they saw

13:10

democratic president. Lowering. Barriers

13:12

on cheap imports from the rest of

13:14

the world that was going to cost

13:17

them their jobs. That created a sense

13:19

of skepticism and a distrust of Washington.

13:22

That. Washington was not in

13:24

favor of the Us manufacturing

13:26

heartland. Between Clinton signing the

13:28

North American Free Trade Agreement

13:30

and Donald Trump coming into

13:32

power, the Tiger shark happen.

13:34

So first, Nafta was a

13:36

symbolic betrayal of American workers.

13:38

Not it's of trade. Sock

13:41

was an actual economic storm

13:43

that really up ended the

13:45

region's that had been manufacturing

13:47

centers for much of the

13:49

last sixty or seventy years.

13:52

They were waiting for somebody to come

13:54

and say we're on your side and

13:56

Trump provided that message. As. you

13:58

mentioned there was this major push for

14:00

globalization free trade in the nineties

14:02

and democratic president bill clinton and

14:04

then later brock obama both helped

14:06

engineer initiatives to lower

14:08

barriers to trade with other countries

14:11

this is the part i don't

14:13

totally understand what that democrats didn't

14:15

adequately communicate the downside a free

14:17

trade that it could

14:19

potentially really hurt american workers or

14:22

is it that they are nicely believed that

14:25

opening up trade with more countries like china

14:27

and mexico would deliver

14:29

prosperity for american workers so

14:31

to understand how we got to the point

14:34

that democratic presidents were advocating for free trade

14:37

kinda important to go back to where the

14:39

push for globalization came from coming

14:42

out of world war two the world was a mess and

14:45

we created a set of institutions that

14:47

would help countries trade with each other

14:49

and help create global prosperity for

14:52

decades the community of trading nations

14:54

it was pretty much high-income countries

14:56

it was the u.s. Europe Canada

14:58

was japan and when those

15:01

countries traded with each other intended

15:03

to be like for like the u.s.

15:05

sending pickup trucks to the rest of the world

15:07

and importing small sedans from

15:09

japan or luxury sedans from germany

15:13

and so we had a sense that

15:15

globalization wasn't going to be that disruptive

15:18

in the nineteen eighties and nineteen nineties

15:20

as president clinton was now beginning

15:23

to assign new free trade agreements

15:25

and it wasn't just democratic presidents

15:27

the north american free trade agreement

15:29

though signed by clinton it was

15:31

first conceived of by president bush

15:34

we were now envisaging expanding trade

15:37

with low-income countries countries we

15:39

hadn't traded with substantially before

15:41

and then china comes onto

15:43

the scene so we now

15:45

have not just low-income countries

15:47

but really big low-income countries

15:49

and i think we made the mistake

15:52

of forecasting forward based on our experience

15:54

of trading with countries that were kind

15:56

of like the u.s. in terms of

15:59

average income levels and saying, well,

16:02

continued globalization just isn't going to

16:04

be that disruptive for the American

16:06

economy. And we were wrong. We

16:08

didn't have mechanisms in place that

16:11

would help workers adjust to the

16:13

very real changes in the global

16:15

marketplace that occurred as countries

16:17

like China came onto the scene and

16:20

began expanding their exports in rapid course.

16:23

Back in 2020, when asked by

16:25

journalist Lulu Garcia Navarro whether he

16:28

would keep Trump's tariffs on China,

16:31

Joe Biden said this. No, hey, look,

16:33

who said Trump's idea is a good one? Who

16:37

said Trump's idea is a good one? Some

16:39

feel that. Two or three

16:42

people. Manufacturers have gone on recession.

16:44

Agriculture lost billions of dollars of taxpayers

16:47

had to pay. We're going

16:49

after China in the wrong way. Basically,

16:52

Biden had largely kept Trump's tariffs

16:54

in place. And now he's

16:56

announced a major increase on $18 billion

16:59

of Chinese goods to be implemented

17:01

over the next two years. So

17:04

what happened? Well, two

17:06

things happened. One was, I think

17:08

upon winning a very close election,

17:11

Joe Biden realized that Donald Trump's

17:14

tariffs were popular in swing states.

17:16

And getting rid of those tariffs would have been political

17:19

suicide. So I think the political side of

17:21

the shop won an argument with the economic side of

17:23

the shop, which said that it just

17:25

makes much more sense for us to

17:27

keep those Trump tariffs in place. The

17:30

other thing that happened was they looked around

17:32

and said, well, what can we do to

17:35

bring manufacturing jobs back? What can we do

17:37

to help restore good

17:39

jobs to places that had been

17:41

eviscerated by global competition? Since

17:44

then, they came up with first, the CHIPs

17:46

Act, then the Inflation Reduction Act. And this

17:49

was after Build Back Better

17:51

and an infrastructure bill that was trying

17:53

to engineer recovery from COVID. But

17:55

in the absence of ways to help

17:58

the former manufacturing bill. recover,

18:00

getting rid of Trump terrorists would have

18:02

seen just like pouring salt on the

18:04

wounds of American workers. The

18:07

Biden administration is focused on

18:09

bringing two specific types of

18:11

manufacturing jobs to the US

18:13

through bills and subsidies, green

18:15

energy technology like electric vehicles

18:17

and solar panels and semiconductors.

18:20

In late April, Biden announced that

18:22

billions of dollars will be directed

18:24

towards building up semiconductor manufacturing in

18:26

the United States. Do you

18:29

think his plan could work? I think

18:32

the jury is very much out. It's important

18:34

to take a step back and say, what

18:36

are we trying to accomplish here? And I

18:38

think the Biden administration is trying to do

18:40

two things. One is

18:43

it's trying to avoid reliance on

18:45

Taiwan as a source for all

18:47

of our semiconductors or most of

18:49

our semiconductors because of its proximity

18:52

to China and concern about military

18:54

instability in the region. That makes

18:56

perfect sense. The other thing

18:58

the Biden administration is trying to do is bring

19:01

manufacturing back to the US. Now

19:04

in trying to hit two targets

19:06

with one policy instrument, I think

19:08

we've set ourselves up for a

19:11

rocky path. Semiconductors

19:13

are incredibly hard to

19:16

produce. They're also incredibly

19:18

hard to design. What gets lost

19:20

in our discussions about semiconductors is

19:22

the US is kind of by

19:24

far and away the leading designer

19:26

of semiconductors in the world. Taiwan

19:29

has figured out to be by far

19:31

and away the largest producer of semiconductors

19:33

in the world, and that's a partnership

19:36

that's worked pretty well for several decades.

19:39

We now want to diversify away

19:41

from Taiwan, but making

19:43

sure all that diversification happens

19:45

in the United States where

19:48

we have a very limited

19:50

track record of producing advanced

19:52

semiconductors seems like a

19:54

tough objective to accomplish. So

19:57

what's likely to happen? Well we're

19:59

going to spend a lot of money building

20:01

some factories, we're likely to get expanded

20:03

chip production here. We

20:05

aren't going to get a ton of

20:08

jobs. You got to realize that semiconductors

20:10

is among the most capital intensive manufacturing

20:12

sectors in the world, which means that

20:14

you can expand production a lot without

20:17

expanding employment a lot. You're

20:19

not convinced that semiconductor manufacturing is

20:21

going to help places hurt by

20:24

the China shock? I'm

20:26

pretty sure that expanded semiconductor employment is

20:28

going to do almost nothing for places

20:30

that were hurt by the China shock.

20:34

Where is semiconductor manufacturing capacity going

20:36

in? It's going into Austin. It's

20:38

going into Columbus, Ohio. It's

20:41

going into upstate New York. It's

20:43

going into Boise, Idaho, into Phoenix.

20:46

These are places that have already established

20:48

supplies of skilled labor. These are places that

20:51

are doing pretty well. Semiconductors

20:53

like to go where there are electrical engineers. Semiconductors

20:56

want to be in places that are already

20:59

tech hubs of one kind or another. The

21:02

places that lost employment as a result of

21:04

the China shock were places that were producing

21:06

sweatshirts, furniture, simple

21:09

electronic goods, not the most

21:11

advanced manufacturing goods. Former

21:14

President Donald Trump is once again

21:16

campaigning on what he calls an

21:18

America first economic policy.

21:21

My agenda will tax China to build

21:23

up America. In addition, as

21:26

a matter of both economic and

21:28

national security, I will implement a

21:30

bold series of reforms to completely

21:32

eliminate dependence on China in

21:35

all critical areas. We will

21:37

revoke China's most favored nation trade

21:39

status and adopt a four

21:41

year plan to phase out all Chinese

21:44

imports of essential goods, everything

21:46

from electronics to steel to

21:49

pharmaceuticals. Gordon, what exactly is he

21:51

saying here? He's putting

21:54

forward a policy agenda that would take the

21:56

better part of a decade to complete, But

21:58

I Think what? he's really. The thing

22:00

is, he wants the United States

22:03

to decouple from China economically. Okay,

22:05

but our economies are pretty

22:07

interrelated, right? So what would

22:09

that mean? They're incredibly intertwined.

22:12

Unbundling those supply chains would

22:14

be an incredible amount of

22:16

work. What is the likely

22:18

result of Trump trying to

22:20

get in the way of

22:22

Us China commerce is products

22:24

that are more costly for

22:26

American consumers and intermediate inputs

22:28

that are more costly for

22:30

American firms. In. An interview this

22:32

past February with Fox. Maria.

22:34

Bartiromo as Trump is a sixty percent

22:37

tariff on Chinese goods within the cards,

22:39

To which he responded, i would say

22:41

maybe it's gonna be more than that.

22:43

How realistic is any of this. American

22:45

presidents have a fair amount

22:47

of leeway to enact temporary

22:50

changes in trade policy. Those

22:52

are usually justified because during

22:54

moments where we have a

22:56

security crisis or we can

22:58

say that a country is

23:00

just dramatically subsidizing exports in

23:02

a particular sector. Ultimately though,

23:04

presidents have to back that

23:06

up. So. What? Trump?

23:08

Could Do is something has threatened

23:11

to do which is to eliminate

23:13

China status as a most favored

23:15

trade ember for the United States.

23:17

I would take care of to

23:19

Sixty Percent or take them back

23:21

to where they were after the

23:23

famous Smoot Hawley terrorists of the

23:26

Nineteen thirties. That would be terrorists

23:28

that a cannot average and and

23:30

I'll kind of like the thirty

23:32

five percent range. Us terrorist on

23:34

imports from China already average twenty

23:36

five percent. So I would say.

23:39

It's realistic for him to raise

23:41

tariffs on China by another ten

23:43

percentage points, getting to sixty and

23:45

keeping a mare. It's hard for

23:47

that to happen without an act

23:49

of Congress. And Congress acting is

23:51

something we haven't seen a lot

23:53

of these days. And yet

23:55

there's a sort of new trade

23:58

paradigm in Washington. Where. both

24:00

parties seem to agree

24:02

or be building off of

24:04

Trump's America First agenda during

24:06

his presidency and Bidenomics, regardless

24:08

of how our current president

24:10

spins it, is a version

24:12

of Trump's approach to trade.

24:15

You took issue with the focus on tariffs.

24:18

Are there other aspects of this

24:20

new consensus that you think aren't

24:23

right? So to

24:25

answer that question, let's go back to the China

24:27

shock and let's say, what could

24:29

we have done right to help

24:32

regions adjust to this new environment

24:34

in which they found themselves competing

24:36

with very cheap goods from China?

24:40

What we could have done is as soon

24:42

as factories started to close, we could have

24:44

provided more generous unemployment insurance to workers to

24:46

help tide them over as they figured out

24:48

what they were going to do next. We

24:51

then could have provided much more

24:54

generous funding for career

24:56

and technical education in local

24:58

community colleges, local public universities

25:00

that help workers transition from the

25:02

jobs they were doing before to

25:04

a new set of jobs. In

25:07

places that have seen dramatic job

25:09

loss, you see the absence of

25:11

those two things happening. People

25:14

finding themselves in financial distress

25:16

and unable to afford the

25:19

cost of retraining themselves and

25:21

falling housing prices, meaning the value

25:24

of people's collateral is disintegrating and

25:26

they're unable to finance the launching

25:29

of new businesses. So

25:31

what we should be focused on

25:33

in ways in which we can

25:35

make sure that investments in human

25:38

capital and investments in new business

25:40

enterprises happen without necessarily dictating to

25:42

communities and regions what exactly those

25:44

new activities should be. Our

25:47

listeners are already hearing a lot of

25:49

technical economic terms coming up in the

25:51

campaign. Trump, for instance, likes

25:54

to talk about things like trade

25:56

deficits and currency devaluation. Joe Biden

25:58

has run up record trade. deficits,

26:00

also known as losses. China

26:02

is killing us. They're devaluing

26:05

their currency to a level that you wouldn't

26:07

believe it makes it impossible

26:10

for our companies to compete. Biden

26:13

is talking about things like intellectual

26:15

property protection. China is stealing intellectual

26:17

property. China is conditioning being able

26:20

to do business in China and

26:22

based on whether or not you have 51% Chinese ownership. What

26:26

do you think news consumers

26:28

and voters, need to

26:30

know about these terms in order to understand

26:32

the campaign rhetoric and make an informed decision?

26:35

I think you should just kind

26:37

of take it back to basics

26:39

in terms of the major problems

26:42

facing the American economy. And

26:44

one of those problems has been the

26:46

absence of good jobs for workers without

26:48

a college education. Now in

26:50

the last few years, we've seen job growth at

26:53

the bottom end of the pay scale, which we

26:55

haven't seen in decades. And that's been great. That

26:57

actually started under president Trump. And

27:00

it's continued under president Biden. But

27:03

that wage growth for lower wage workers

27:05

is coming after decades of

27:07

wage stagnation. If

27:09

you're talking to me about trade deficits, you

27:11

aren't talking to me about good jobs, I

27:14

would avoid fancy arguments

27:16

that are taking us towards esoteric

27:18

policy tools and away from the

27:20

primary challenge that we face, which

27:22

is higher incomes for American workers

27:24

who didn't go to college. I

27:27

feel like you have a bone

27:29

to pick with trade deficits. Do

27:31

you want to just explain why you think

27:33

there's too much focus on trade deficits? So

27:36

what is a trade deficit? A trade

27:38

deficit is when we

27:41

buy more from other people than

27:43

they buy from us. Full stop.

27:45

It means our imports are greater

27:47

than our exports. Now

27:49

it might make sense to say, well,

27:51

the reason that's happening is because the

27:54

people we're trading with are

27:56

not letting our goods in and we're letting

27:58

their goods in. and

28:00

as attractive as that reasoning

28:02

sounds is wrong. Trade

28:05

deficits aren't about trade

28:07

barriers. They aren't about tariffs.

28:09

Trade deficits are about

28:12

your savings and investment being different

28:14

from my savings and investment. The

28:17

US doesn't save very much, and it invests

28:19

a lot more than it saves. And as

28:21

a consequence, we need to borrow from the

28:23

rest of the world in order to do

28:25

so. That borrowing takes the

28:28

form of a trade deficit. That

28:30

trade deficit becomes this big attractive target

28:32

that people like Donald Trump can come

28:35

along and say, I'm going to solve

28:37

it with tariffs. Lo

28:39

and behold, what has happened to US

28:41

trade deficits since Trump's tariffs went

28:43

into effect in 2018? They've gotten

28:46

bigger. But this time is going to

28:48

be different, Gordon. I'll

28:53

take the other side of that. You

28:55

were part of a team of economists

28:57

who helped define and dub

28:59

this term the China shock. It's

29:02

a term that's now widely used

29:04

to describe China's impact on US

29:06

manufacturing. How do you feel about

29:08

the impact of your research now that

29:10

we live in this very

29:14

anti-Chinese political moment?

29:17

Of course, defining the China shock was

29:19

important scholarship, but today, do you think

29:22

it's taken up too much in

29:24

our current conversation? We're

29:27

academics. We didn't cause the China

29:29

shock. We just documented it.

29:32

And in documenting it, we

29:34

wanted to highlight the fact

29:36

that we as economists had

29:38

not been fully honest about

29:41

what we call the distributional

29:43

consequences of globalization. That's

29:45

a fancy term to mean that when we

29:48

trade more with the rest of the world,

29:50

when we're more integrated into the global economy,

29:53

they're going to be winners and losers. We

29:55

were too sanguine about the

29:58

consequences of expanded global globalization

30:00

in the 1990s and we did

30:02

not take care to prepare for the

30:05

very real losses that Americans suffered as

30:07

a Consequence of continued

30:10

increases in global commerce

30:13

That's on us. And so we feel

30:15

that the message of our research is

30:18

We need to be better prepared to

30:20

help deal with the fact that globalization

30:23

and other major changes in the

30:25

economy creates winners as well as

30:28

losers and if we're not Prepared

30:30

to help folks who've lost from

30:32

those big changes adjust to new

30:34

economic realities We're gonna face an

30:36

environment of severe political and social

30:38

disruption, which is kind of what

30:40

we're living through right now What

30:43

do you think the press could be doing better to help

30:46

Americans understand? What's at stake economically

30:48

in this election? Here's

30:51

the thing that doesn't get discussed enough which

30:53

has come up in several of your questions

30:55

and in a lot of our discussion Which

30:57

is that it looks

30:59

like Donald Trump and Joe Biden agree

31:01

about lots of current US trade policy

31:04

Now Donald Trump is saying much more aggressive

31:06

things about what he hopes to do in

31:08

the future Then Joe Biden

31:11

is saying what we're seeing is kind

31:13

of this surprising Convergence in terms of

31:16

what we should be doing about trade

31:18

Donald Trump put tariffs in place. Joe

31:21

Biden did not change them Materially

31:24

both are talking about the need

31:26

to support American manufacturing Both

31:28

are talking about the need to take on

31:31

China and both are doing this Unilaterally

31:33

without broad-based alliances that we've

31:35

relied on in the past

31:39

Gordon, thank you very much My

31:41

pleasure Micah, this has been a really enjoyable for

31:43

me Gordon Hanson is an

31:45

economist and the co-director of the

31:47

reimagining the economy project at

31:50

Harvard University's Kennedy School Thanks

31:55

so much for listening to the midweek podcast be

31:57

sure to check out this week's big show on

32:00

Friday. I'm Michael Loehlinger.