...This raises the question of the agenda that Donald Trump wants to pursue in trade deals. If his goal is first and foremost to regain manufacturing jobs by reducing the size of the trade deficit, then the top priority should be lowering the value of the dollar against the currencies of China and other trading partners.
A lower valued dollar will make U.S. exports cheaper for people living in other countries leading them to buy more of our exports. It will also make imports more expensive for people in the United States. That will cause U.S. consumers to substitute domestically produced items for imports. The net effect would be a smaller trade deficit and more jobs in manufacturing.
While it is not possible to get back the five million manufacturing jobs we have lost in the last two decades, plausible reductions in the trade deficit could bring back 1-2 million manufacturing jobs. This would have a noticeable impact on the labor market for workers without college degrees.
However it is not clear that Trump plans to pursue a trade policy focused on getting back manufacturing jobs. While he railed about currency “manipulation” in the election campaign, he also complained that other countries didn’t grant our companies adequate market access or respect the patents and copyrights of U.S. companies.
These are conflicting agendas and it remains to be seen whether Trump pursues a trade agenda that will increase manufacturing jobs or one that will further enrich corporate America. With the top two economic posts in the Trump administration going to Goldman Sachs alums, the smart money is betting on the corporate agenda...
