tag:theconversation.com,2011:/us/topics/political-economics-57819/articlesPolitical economics – The Conversation2019-06-12T11:30:10Ztag:theconversation.com,2011:article/1175652019-06-12T11:30:10Z2019-06-12T11:30:10ZCompanies’ self-regulation doesn’t have to be bad for the public<figure><img src="https://images.theconversation.com/files/278726/original/file-20190610-52758-189aq1l.jpg?ixlib=rb-1.1.0&rect=0%2C162%2C5184%2C3282&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Managing a shared resource doesn't have to involve fences.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sheep-new-zealand-421561492">Caroline Ryan</a></span></figcaption></figure><p>If Boeing is allowed to <a href="https://www.washingtonpost.com/investigations/how-the-faa-allows-jetmakers-to-self-certify-that-planes-meet-us-safety-requirements/2019/03/15/96d24d4a-46e6-11e9-90f0-0ccfeec87a61_story.html">certify that a crash-prone aircraft is safe</a>, and Facebook can <a href="https://www.nytimes.com/2019/03/07/opinion/zuckerberg-privacy-facebook.html">violate users’ privacy expectations</a>, should companies and industries ever be <a href="https://thehill.com/blogs/congress-blog/the-administration/436328-corporate-self-regulation-is-failing">allowed to police themselves</a>? The debate is <a href="https://www.reuters.com/article/us-tech-antitrust-legal-explainer/explainer-should-big-tech-fear-u-s-antitrust-enforcers-idUSKCN1T62K3">heating up</a> particularly in the U.S. tech sector with growing calls to regulate – or even break up – the likes of <a href="https://www.marketwatch.com/story/amazon-retail-chief-says-scrutiny-is-warranted-but-companys-breakup-is-not-2019-06-05">Google, Apple and Amazon</a>. </p>
<p>It turns out to be possible, at least sometimes, for companies and industries to govern themselves, while still protecting the public interest. Groundbreaking work by <a href="http://www.aei.org/publication/elinor-ostrom-and-the-solution-to-the-tragedy-of-the-commons/">Nobel Prize-winning political economist Elinor Ostrom</a> and her husband Vincent found a solution to a classic economic quandary, in which people – and businesses – self-interestedly enrich themselves as quickly as possible with <a href="https://doi.org/10.1111/ablj.12116">certain resources</a> including <a href="http://bierdoctor.com/papers/Rader_derived_data_abstract_May_2017.pdf">personal data</a>, thinking little about the secondary costs they might be inflicting on others.</p>
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<a href="https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=892&fit=crop&dpr=1 600w, https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=892&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=892&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1121&fit=crop&dpr=1 754w, https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1121&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/278729/original/file-20190610-52771-1j02bnf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1121&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Elinor Ostrom in 2009, when she won the Nobel Prize in Economics.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Nobel_Prize_2009-Press_Conference_KVA-30.jpg">Holger Motzkau/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>As the director of the <a href="https://ostromworkshop.indiana.edu/research/internet-cybersecurity/index.html">Ostrom Workshop Program on Cybersecurity and Internet Governance</a>, I have been involved in numerous projects studying how to solve these sorts of problems when they arise, both online and offline. Most recently, my <a href="https://illinoislawreview.org/print/vol-2017-no-2/when-toasters-attack/">work</a> has looked at how to manage the massively interconnected world of sensors, computers and smart devices – what I <a href="https://www.cisco.com/c/dam/en_us/solutions/industries/docs/gov/everything-for-cities.pdf">and others</a> call the “<a href="https://dx.doi.org/10.2139/ssrn.3266188">internet of everything</a>.” </p>
<p>I’ve found that there are ways <a href="https://doi.org/10.1162/002081898550789">companies can become leaders</a> by <a href="https://ssrn.com/abstract=2573787">experimenting with business opportunities</a> and collaborating with peers, while still working with regulators to protect the public, including both in the air and in cyberspace.</p>
<h2>Tragedy revisited</h2>
<p>In a classic economic problem, called “<a href="https://en.wikipedia.org/wiki/Tragedy_of_the_commons">the tragedy of the commons</a>,” a parcel of grassland is made available for a community to graze its livestock. Everyone tries to get the most benefit from it – and as a result, the land is overgrazed. What started as a resource for everyone becomes of little use to anyone. </p>
<p>For many years, economists thought there were only two possible solutions. One was for the government to step in and limit how many people could graze their animals. The other was to split the land up among private owners who had exclusive use of it, and could sustainably manage it for their individual benefit.</p>
<p>The Ostroms, however, found a third way. In some cases, they revealed, <a href="http://www.aei.org/publication/elinor-ostrom-and-the-solution-to-the-tragedy-of-the-commons/">self-organization can work well</a>, especially when the various people and groups involve can <a href="https://www.iucn.org/downloads/policy_matters_19_preface__introductions_and_chapters_1_5.pdf">communicate</a> effectively. They called it “polycentric governance,” because it allows regulation to come from more than just one central authority. Their work can help determine if and when companies can effectively regulate themselves – or whether it’s best for the government to step in.</p>
<h2>A polycentric primer</h2>
<p>The concept can seem complicated, but in practice it is increasingly popular, in federal programs and even as a goal for <a href="https://www.washingtonpost.com/news/the-switch/wp/2014/10/07/internet-operations-chief-snowden-disclosures-make-my-job-easier/">governing the internet</a>. </p>
<p>Scholars such as Elinor Ostrom produced a broad swath of research over decades, looking at <a href="https://books.google.hr/books/about/Polycentricity_and_Local_Public_Economie.html?id=iBZ32c7KLWUC&redir_esc=y">public schools and police department performance</a> in Midwestern U.S. cities, coastal overfishing, forest management in nations like Nepal, and even <a href="https://ir.lawnet.fordham.edu/ulj/vol37/iss3/7">traffic jams</a> in New York City. They identified <a href="https://dx.doi.org/10.2139/ssrn.1304697">commonalities among all these studies</a>, <a href="https://www.nobelprize.org/uploads/2018/06/ostrom_lecture.pdf">including</a> whether the group’s members can help set the rules by which their shared resources are governed, how much control they have over who gets to share it, how disputes are resolved, and how everyone’s use is monitored.</p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/T6OgRki5SgM?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">Nobel Prize winner Elinor Ostrom explains her work in a 2010 lecture.</span></figcaption>
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<p>All of these factors can help predict whether individuals or groups will successfully self-regulate, whether the challenge they’re facing is <a href="https://ssrn.com/abstract=1494833">climate change</a>, <a href="https://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1888&context=aulr">cybersecurity</a>, or anything else. <a href="http://escotet.org/2010/11/interview-with-nobel-laureate-elinor-ostrom/">Trust is key</a>, as Lin Ostrom said, and an excellent way to build trust is to let <a href="http://dx.doi.org/10.1038/nclimate2490">smaller groups make their own decisions</a>.</p>
<p>Polycentric governance’s embrace of self-regulation involves relying on <a href="https://www.ubs.com/microsites/nobel-perspectives/en/laureates/elinor-ostrom.html">human ingenuity</a> and collaboration skills to solve difficult problems – while focusing on practical measures to address specific challenges.</p>
<p>Self-regulation does have its limits, though – as has been clear in the revelations about how <a href="https://www.businessinsider.com/faa-let-boeing-self-regulate-software-believed-737-max-crashes-2019-3">the Federal Aviation Administration allowed Boeing</a> to <a href="https://www.businessinsider.com/faa-let-boeing-self-regulate-software-believed-737-max-crashes-2019-3">certify the safety</a> <a href="https://arstechnica.com/information-technology/2019/03/boeing-downplayed-737-max-software-risks-self-certified-much-of-planes-safety/">of its own software</a>. Facebook has also been heavily criticized for failing to block an <a href="https://www.cbsnews.com/news/facebooks-biggest-fails-before-cambridge-analytica/">anonymous horde</a> of <a href="https://www.wired.com/story/facebook-passwords-plaintext-change-yours/">users across the globe</a> from <a href="https://theconversation.com/facebooks-social-responsibility-should-include-privacy-protection-94549">manipulating people</a>’s <a href="https://www.nytimes.com/2019/04/25/technology/facebook-regulation-ftc-fine.html">political views</a>.</p>
<p>Polycentric regulation is a departure from the idea of “<a href="https://www.dallasnews.com/opinion/commentary/2012/06/14/jeffrey-weiss-elinor-ostroms-enduring-trust-in-the-commons">keep it simple, stupid</a>” – rather, it is a call for engagement by numerous groups to grapple with the complexities of the real world. </p>
<p>Both Facebook and Boeing now need to convince themselves, their employees, investors, policymakers, users and customers that they can be trusted. Ostrom’s ideas suggest they could begin to do this by engaging with peers and industry groups to set rules and ensure they are enforced.</p>
<h2>Governing the ‘internet of everything’</h2>
<p>Another industry in <a href="https://www.forbes.com/sites/annashedletsky/2018/08/06/why-industrial-iot-is-usually-a-failure-and-how-to-fix-it/#2fe576d042ed">serious need of better regulations</a> is the smart-device business, with tens of billions of connected devices around the world, and little to no <a href="https://www.csmonitor.com/World/Passcode/Passcode-Voices/2016/1026/Opinion-How-to-fix-an-internet-of-broken-things">concern</a> for user security or privacy.</p>
<p>Customers often buy the cheapest smart-home camera or digital sensor, <a href="https://www.schneier.com/books/click_here/">without looking at competitors’</a> security and privacy protections. The results are predictable – hackers have hijacked thousands of internet-connected devices and used them to attack the <a href="https://www.forbes.com/sites/davelewis/2017/10/23/the-ddos-attack-against-dyn-one-year-later/#4765cbe51ae9">physical network of the internet</a>, take control of <a href="https://www.bbc.com/news/technology-30575104">industrial</a> equipment, and spy on private citizens through their smartphones and <a href="https://www.marketwatch.com/story/woman-claims-hacker-used-baby-monitor-to-spy-on-her-in-her-bedroom-2018-06-07">baby monitors</a>.</p>
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<a href="https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/278730/original/file-20190610-52789-1oe6wxi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Who else might be watching this view, over the internet?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/closeup-baby-monitor-security-538634722">Saklakova/Shutterstock.com</a></span>
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</figure>
<p>Some governments are starting to get involved. The state of California and the European Union are exploring laws that promote “<a href="https://www.natlawreview.com/article/california-law-iot-devised-to-have-reasonable-security-feature">reasonable</a>” security requirements, at least as a baseline. The EU is encouraging companies to band together to establish <a href="https://iapp.org/news/a/will-the-gdpr-incite-sectoral-codes-of-conduct/">industry-wide codes of conduct</a>. </p>
<h2>Getting governance right</h2>
<p>Effective self-governance may seem impossible in the “Internet of everything” because of the scale and variety of groups and industries involved, but polycentric governance does provide a useful lens through which to view these problems. Ostrom has asserted this approach may be <a href="https://dx.doi.org/10.2139/ssrn.1304697">the most flexible and adaptable way</a> to manage rapidly changing industries. It may also help avoid conflicting government regulations that risk stifling innovation in the name of protecting consumers without helping either cause. </p>
<p>But success is not certain. It requires active engagement by all parties, who must share a sense of responsibility to the customers and mutual trust in one another. That’s not easy to build in any community, let alone the <a href="https://www.digitalistmag.com/digital-economy/2018/07/20/digital-transformation-modern-form-of-creative-destruction-06179806">dynamic tech industry</a>.</p>
<p>Government involvement can help build bridges and solidify trust across the private sector, as happened with cybersecurity efforts from the <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2446631">National Institute for Standards and Technology</a>. Some states, like <a href="https://www.techrepublic.com/article/ohio-law-creates-cybersecurity-safe-harbor-for-businesses/">Ohio</a>, are even rewarding firms for using appropriate self-regulation in their cybersecurity decision-making.</p>
<p>Polycentric governance can be flexible, adapting to new technologies more appropriately – and often more quickly – than pure governmental regulation. It also can be more efficient and cost-effective, though it’s not a cure for all regulatory ills. And it’s important to note that regulation can spur innovation as well as protect consumers, especially <a href="https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-simple-rules-of-disciplined-innovation">when the rules are simple</a> and outcome focused.</p>
<p>Consider the North American Electric Reliability Council. That organization was originally created as a group of companies that came together voluntarily in an effort to protect against blackouts. NERC standards, however, were eventually made legally enforceable in the aftermath of the <a href="http://www.eenews.net/stories/1059985876/print">Northeast blackout of 2003</a>. They are an example of an organic code of conduct that was voluntarily adopted and subsequently reinforced by government, consistent with professor Ostrom’s ideas. Ideally, it should not require such a crisis to spur this process forward. </p>
<p>Ultimately, what’s needed – and what professor Ostrom and her colleagues and successors have called for – is more experimentation and less theorizing. As the 10-year anniversary of Ostrom’s Nobel Prize approaches, I believe it is time to put her insights to work, offering industries the opportunity to self-regulate where appropriate while leaving the door open for the possibility of government action, including antitrust enforcement, to protect the public and promote <a href="https://ndias.nd.edu/news-publications/ndias-quarterly/the-meaning-of-cyber-peace/">cyber peace</a>.</p>
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<p class="fine-print"><em><span>Scott Shackelford does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A Nobel Prize-winning political economist found a way to promote good governance and protect users without the need for heavy-handed government regulation.Scott Shackelford, Associate Professor of Business Law and Ethics; Director, Ostrom Workshop Program on Cybersecurity and Internet Governance; Cybersecurity Program Chair, IU-Bloomington, Indiana UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1172862019-05-21T21:31:23Z2019-05-21T21:31:23ZWhat China wants: 3 things motivating China’s position in trade negotiations with the US<p>Relations between the U.S. and China have deteriorated sharply in recent days after trade negotiations broke down, leading some to <a href="https://www.nytimes.com/2019/05/20/business/huawei-trump-china-trade.html">suggest we are on the cusp</a> of a new “cold war.” </p>
<p>President Donald Trump <a href="https://www.cnbc.com/2019/05/05/trump-says-tariffs-on-200-billion-of-chinese-goods-will-increase-to-25percent-on-friday.html">blames the resumption of hostilities</a> on China. Specifically, he and his negotiators say their Chinese counterparts backtracked on an agreement to change laws aimed at enforcing the deal, prompting Trump to raise tariffs on US$200 billion in imports and China to retaliate. Only a few weeks earlier, the two sides seemed very close to a deal. </p>
<p>So what led to China’s change of heart – if there was one? </p>
<p>As an <a href="https://scholar.google.com/citations?user=2ZSlHs4AAAAJ&hl=en&oi=ao">expert on China’s development and economic reform</a>, I believe the answer lies in trying to understand the situation from the Chinese perspective. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/275737/original/file-20190521-23829-1pz0lqx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/275737/original/file-20190521-23829-1pz0lqx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/275737/original/file-20190521-23829-1pz0lqx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/275737/original/file-20190521-23829-1pz0lqx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/275737/original/file-20190521-23829-1pz0lqx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/275737/original/file-20190521-23829-1pz0lqx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/275737/original/file-20190521-23829-1pz0lqx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Chinese and U.S. negotiators seemed close to a deal – until they weren’t.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/US-China-Trade-Talks/174ae879f3644b73a1c11c5c51044ae0/25/0">AP Photo/Jacquelyn Martin</a></span>
</figcaption>
</figure>
<h2>China’s rise</h2>
<p>China <a href="https://news.cgtn.com/news/3041544f79597a6333566d54/share.html">was a poor country</a> not long ago. Its leaders effectively developed its productive and institutional capabilities by learning from foreign countries while allowing domestic companies to flourish over four decades of reform. </p>
<p>While this is commendable, <a href="https://heinonline.org/HOL/LandingPage?handle=hein.journals/mercer65&div=43&id=&page=&t=1558447275">as my research shows</a>, and something <a href="http://www.doi.org/10.1007/s12116-012-9110-y">other developing economies should emulate</a>, it has also been controversial, particularly as China’s economy has become the <a href="https://www.investopedia.com/insights/worlds-top-economies/">world’s second-largest</a>.</p>
<p>In 2015, a <a href="https://www.china-briefing.com/news/made-in-china-2025-explained">10-year plan known as “Made in China 2025”</a> put in place a set of incentives to encourage Chinese companies to move from basic manufacturing to high-tech sectors such as electric cars, robotics and artificial intelligence. China’s goal is to have its companies globally competitive in these sectors by 2025. </p>
<p>However, in order to meet these ambitious goals, in some cases Chinese companies must rely on subsidies, government funding, forced technology transfer and intellectual property theft. To foreign political and business leaders, these practices smack of unfair competition. </p>
<p>Now that China has established strong capabilities, the threat of overtaking the U.S. in high-tech areas such as AI seems real and the methods being used appear unfair. That’s why, as part of the negotiations, the Trump administration <a href="https://www.nytimes.com/2019/05/06/us/politics/trump-tariffs-china.html">was trying to get China to end its practice</a> of forced technology transfer by changing their laws.</p>
<p>The U.S. said China agreed to do this, but the <a href="https://www.nytimes.com/2019/05/06/us/politics/trump-tariffs-china.html">Chinese rejected</a> those claims. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/275732/original/file-20190521-23845-1gxmpal.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/275732/original/file-20190521-23845-1gxmpal.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=440&fit=crop&dpr=1 600w, https://images.theconversation.com/files/275732/original/file-20190521-23845-1gxmpal.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=440&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/275732/original/file-20190521-23845-1gxmpal.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=440&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/275732/original/file-20190521-23845-1gxmpal.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=553&fit=crop&dpr=1 754w, https://images.theconversation.com/files/275732/original/file-20190521-23845-1gxmpal.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=553&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/275732/original/file-20190521-23845-1gxmpal.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=553&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Trade officials celebrate China’s entry into WTO in 2001.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/EURO-AP-I-CHE-GEV101-SWITZERLAND-WTO-TRADE-CHINA/80ab8142c3e0da11af9f0014c2589dfb/3/0">AP Photo/Donald Stampfli</a></span>
</figcaption>
</figure>
<h2>China’s internal debate</h2>
<p>While China will understandably not give up its development goals to please the U.S., the methods used to achieve them are also controversial within China. </p>
<p>There are those who want to continue to reform the economy by making it more efficient and letting private companies – rather than the government – handle business decisions. Others want to keep the government at the center of things by operating state-owned companies and providing support to other sectors of the economy, old and new. </p>
<p>It is generally accepted that the <a href="https://www.wsj.com/articles/a-better-way-to-deal-with-beijing-11557875502?emailToken=c80d35e30f87e13834bccf307eed7992ais34hre20fDuqLs5Z/GDc/1R9YjqnHfRzHKWpiOebOtUpOEONRyHkZBdjFQuuLqIi7rw03Tj4nfyCauX5xHsg%3D%3D&reflink=article_email_share">reformers would like to see some of the very changes</a> that the Trump administration has been pushing for, such as more protection for intellectual property rights, open competition and a modern financial system to allow better global integration and a free-floating currency.</p>
<p>Reforms such as these carry risks, however. China’s economy has been <a href="https://www.washingtonpost.com/world/chinese-economy-slows-to-lowest-growth-rate-in-28-years/2019/01/21/c3fccbf0-1d66-11e9-bda9-d6efefc397e8_story.html?noredirect=on&utm_term=.306fdd6423cd">slowing</a>, and some policymakers worry that now is not the time to rock the boat. In times of economic distress, China has shown a tendency to fall back on <a href="https://www.scmp.com/business/article/2105987/shanghais-price-controls-new-homes-toughest-china-says-jinmao-chief">top-down controls</a> that were the norm when China had a centrally planned economy. </p>
<p>China has been here before. Based on my research on the process leading to <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.488.581&rep=rep1&type=pdf">China’s entry into the World Trade Organization</a> in 2001, China’s internal debates were intense. Some policymakers believe that <a href="https://www.iatp.org/sites/default/files/China_and_the_WTO_The_Politics_Behind_the_Agre.htm">China gave up too much</a> for the privilege, including changing many domestic laws – just as the Trump administration is seeking. </p>
<p>Those memories are likely influencing the debate in China today. </p>
<h2>National humiliation</h2>
<p>A third factor provides an overarching context that is deeply integrated with the first two: China’s leaders and people will not tolerate “humiliation” by foreigners.</p>
<p>In the 1800s, <a href="https://www.nytimes.com/2018/07/02/books/review/stephen-r-platt-imperial-twilight.html">Western powers won two so-called opium wars</a> and received control over treaty-ports in China, allowing them to impose better terms of trade for themselves. The “<a href="https://www.latimes.com/world/la-fg-china-trade-war-tariffs-colonialism-humiliation-20190513-story.html">century of humiliation</a>” that followed is known to all Chinese, and China’s leaders have promised it will never happen again. </p>
<p>Fast forward to today, and President Xi Jinping’s <a href="https://www.dw.com/en/xi-jinping-and-the-chinese-dream/a-43685630">“China Dream”</a> is to establish China as a leading world power on par with the U.S. Hence, President Xi cannot be seen at home as weak by giving into American demands. China feels it must preserve its path to domestic economic strength and decide on its own what changes to make to its economic system. </p>
<p>These sensitivities underlie the instability of the current U.S.-China negotiations and the relationship more generally. They also show why, even though China doesn’t want a trade war with the U.S., finding a deal that satisfies both countries is not impossible, but will be tricky. </p>
<p>China’s reformers seem to have lost the upper hand in recent weeks, making it even less likely that the Chinese will make changes that are compatible with what the U.S. wants. Ultimately, any deal will need to convey to Chinese citizens that President Xi did the right thing for the country. </p>
<p>Combine this with the fact that Trump may seem to Americans to have “won” the trade war simply by appearing tough on China – whether or not a deal is struck – and the prospects of a positive resolution look dim.</p><img src="https://counter.theconversation.com/content/117286/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Penelope B. Prime is the founding director of the China Research Center, a non-profit organization based in Atlanta, Georgia. </span></em></p>US-China relations are fast deteriorating, leading to fears that a ‘cold war’ may be brewing. A China expert explains what’s motivating its behavior.Penelope B. Prime, Clinical Professor of International Business, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1171592019-05-15T20:52:08Z2019-05-15T20:52:08ZIs Trump’s trade war saving American jobs – or killing them?<figure><img src="https://images.theconversation.com/files/274728/original/file-20190515-60567-14cvxlp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Trump administration says its trade policy saved the U.S. steel industry.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Pence/41ff064a9ae147d2bd54a94856edfade/7/0">AP Photo/Jim Mone</a></span></figcaption></figure><p>With the U.S.-China trade war <a href="https://www.nytimes.com/2019/05/13/us/politics/us-china-trade-tariffs.html">intensifying</a>, there is a lot of talk about whether tariffs save American jobs – as President Donald Trump <a href="https://www.nytimes.com/2018/09/17/us/politics/trump-tariffs-american-factories.html">claims</a> – or <a href="https://www.forbes.com/sites/stuartanderson/2018/09/24/tariffs-are-costing-jobs-a-look-at-how-many/#6e6f2e3d7b26">destroy them</a>. </p>
<p>On May 14, for example, Trump said his tariffs <a href="https://thehill.com/homenews/administration/443523-trump-credits-tariffs-for-rebuilding-us-steel-industry">helped save</a> the U.S. steel industry. Whether or not that’s true, many economists and industry organizations argue trade protectionism is actually hurting workers in a range of other areas, such as the <a href="https://www.forbes.com/sites/jamesellsmoor/2019/02/24/under-trumps-tariffs-the-us-lost-20000-solar-energy-jobs/">solar power sector</a>, <a href="https://www.cnbc.com/2019/05/13/boeing-shares-fall-on-speculation-that-china-may-single-it-out-in-the-trade-war.html">civil aircraft</a> and <a href="https://www.freep.com/story/money/cars/mark-phelan/2019/02/18/tariffs-trump-steel-aluminum-nada/2885080002/">auto manufacturing</a>.</p>
<p>So is the trade war making Americans better off or worse? Political economists <a href="https://sgpp.arizona.edu/user/jeff-kucik">like me</a> have been exploring this question since Trump’s trade war began about a year ago. The answer makes a big difference to the economic welfare of American workers. And, with the 2020 elections soon approaching, it may help determine whether Trump is able to remain in the Oval Office.</p>
<h2>The winners</h2>
<p>At first glance, the jobs data does look good for Trump’s argument. </p>
<p>Since Trump <a href="https://piie.com/blogs/trade-investment-policy-watch/trump-trade-war-china-date-guide">announced tariffs</a> on more than 1,000 Chinese products on April 3, 2018, about <a href="https://data.bls.gov/timeseries/ces0000000001?output_view=net_1mth">2.6 million new jobs</a> have been added to the U.S. economy.</p>
<p>This includes <a href="https://data.bls.gov/timeseries/CES3000000001">204,000 jobs in manufacturing</a>, the sector of the economy that hemorrhaged over 5 million positions from 2000 to 2009, a problem blamed on <a href="https://ourfuture.org/20150309/how-our-trade-policies-kill-jobs">free trade</a> and <a href="https://www.npr.org/2016/04/18/474393701/china-killed-1-million-u-s-jobs-but-don-t-blame-trade-deals">China</a>.</p>
<p>The good news for Trump doesn’t stop there. Some of the biggest gainers over the last year are industries like fabricated metals, machinery and electronic instruments, all of which saw gains of 15,000 to almost 30,000 jobs over the past year. All those industries enjoy at least some protection from Trump’s tariffs.</p>
<p>Those numbers seem to support Trump’s rhetoric that tariffs are providing a vital shot in the arm of America’s ailing manufacturing sector. And they may even show why the U.S. economy continues to hum despite <a href="https://www.newsweek.com/us-china-trade-war-recession-economy-bank-america-1421994">economist fears</a> that a trade war would <a href="https://www.cnbc.com/2019/05/15/latest-data-show-surprise-slowing-in-us-china-economies-as-trade-war-escalates.html">hurt growth</a>. </p>
<h2>The losers</h2>
<p>Unfortunately, not all industries are enjoying the same success. </p>
<p>Of the 20 major manufacturing categories in the <a href="https://www.bls.gov/ces/">latest Bureau of Labor Statistics data</a>, only six have grown faster during the trade war – which arguably began with the threat of widespread tariff increases in April of 2018 – than in previous years. The rest, which include chemicals, paper and textiles, either didn’t enjoy a boost or lost ground during the period. </p>
<p>And here is one lesson from the trade war. If Trump and his supporters want to claim that tariffs helped accelerate job creation in machinery and metals, then it follows that his policies should share some of the blame for the less encouraging performance of other sectors hurt by <a href="https://www.cmtradelaw.com/category/china-retaliatory-tariffs/">retaliation from other countries</a>.</p>
<p>After Trump extended steel tariffs to the European Union, the <a href="http://trade.ec.europa.eu/doclib/docs/2018/may/tradoc_156909.pdf">EU</a> hit America’s textiles industry. <a href="https://www.fin.gc.ca/access/tt-it/cacsap-cmpcaa-1-eng.asp">Canada</a> targeted some paper products in retaliation for tariffs on steel and <a href="https://globalnews.ca/news/4293847/tariffs-lumber-pricing-americans-out-of-housing-market-trump/">softwood lumber</a>. And China, Trump’s primary antagonist, <a href="https://www.crowell.com/files/20180803-China-301-Retaliation-List-25-Percent-Tariffs-Unofficial.pdf">hit chemicals</a> along with a large swath of other industries – with <a href="https://www.bbc.com/news/business-48253002">further retaliation</a> on the way. </p>
<h2>Beyond jobs</h2>
<p>Nonetheless, the simple fact remains: The U.S. economy continues to add more jobs.</p>
<p>But this is only one part of the equation for how tariffs are affecting working Americans and their quality of life. What about wages, which <a href="https://www.bls.gov/opub/ted/2016/wages-and-salaries-for-private-industry-workers-increase-2-point-6-percent-over-the-year-ended-june-2016.htm">account for 70%</a> of an employee’s average compensation?</p>
<p>There’s less good news for Trump in this data. </p>
<p>The annual growth in seasonally adjusted hourly pay during the trade war averages out to <a href="https://fred.stlouisfed.org/series/CES0500000003">around 3.2%</a> across all private sector U.S. employees.</p>
<p>There are two important things to say about that 3.2%. First, it falls short of pre-Great Recession levels, when wage growth was typically <a href="https://www.frbatlanta.org/chcs/wage-growth-tracker.aspx">a full point higher</a>. Second, wage growth in manufacturing – the sector Trump has lavished the most attention on – actually <a href="https://www.latimes.com/business/la-na-trump-manufacturing-wage-growth-lags-20190411-story.html">lags behind</a> the national average at just 2.3%.</p>
<p>Those wage numbers are good reason to hold our applause for Trump’s tariffs. Protected industries are adding jobs, but wages aren’t living up to expectations.</p>
<h2>Looking for good news</h2>
<p>The competing job numbers explain why the debate over Trump’s tariffs are full of confusing anecdotes – and why most anyone can find “good news” to support their favorite argument.</p>
<p>Americans have heard United Steel Workers <a href="https://www.apnews.com/05b90ea409da42ab9534ce40ed9ffa48">thank Trump</a> for helping bring <a href="https://www.cnn.com/2019/02/12/business/us-steel-mill/index.html">over 1,000 jobs</a> back to Birmingham, Alabama. They’ve also heard General Motors announce that it <a href="https://hillreporter.com/general-motors-is-preparing-to-lose-a-massive-1-billion-over-trumps-tariffs-4416">lost US$1 billion</a> in 2018, partly because tariffs contributed to rising production costs, and that as many as <a href="https://reason.com/2018/11/26/after-losing-1-billion-to-tariffs-genera/">14,000 jobs are being cut</a>.</p>
<p>A fuller picture of how well workers are doing requires looking beyond the jobs numbers at how much money they’re actually taking home – and how it’s affecting their living standards. </p>
<p>And none of this says anything about another crucial part of the equation: consumer prices. If the latest data from Goldman Sachs is on the money, things are about to get a whole lot worse for working-class Americans as the price tags attached to products affected by the trade war <a href="https://www.cnbc.com/2019/05/13/this-chart-from-goldman-sachs-shows-tariffs-are-raising-prices-for-consumers-and-it-could-get-worse.html">begin to rocket upward</a>. </p>
<p>This is hardly good news for the average household.</p><img src="https://counter.theconversation.com/content/117159/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeffrey Kucik does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Trump claims the tariffs he’s imposed on imports from China and elsewhere are saving US industries and jobs. The data offers a murkier picture.Jeffrey Kucik, Assistant Professor of Political Science, University of ArizonaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1007022018-08-03T17:09:37Z2018-08-03T17:09:37ZHow Trump’s trade war affects working-class Americans<p>President Donald Trump <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-confronting-chinas-unfair-trade-policies/">justifies tariffs</a> on imports by arguing that “unfair trade policies” have harmed American workers. This has led to a trade war in which the U.S. and China have placed tit-for-tat tariffs on each other’s products.</p>
<p>Most recently, China <a href="https://www.bloomberg.com/news/articles/2018-08-03/china-plans-tariffs-on-60-billion-of-imports-to-counter-trump">said</a> it’s ready to slap tariffs on US$60 billion in U.S. imports if Trump goes ahead with his threat to tax another $200 billion of Chinese goods. </p>
<p>Since the president claims to be acting on behalf of working-class Americans, it’s fair to ask: How do tariffs actually affect them? </p>
<p>Scholars of international political economy, such as <a href="https://sgpp.arizona.edu/user/jeff-kucik">myself</a>, recognize that trade hasn’t always been good for poorer Americans. However, the economic fundamentals are clear: Tariffs make things worse. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230626/original/file-20180803-41360-tproub.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">American auto workers demonstrate against trade tariffs they say will negatively affect U.S. auto manufacturing.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Congress-Trade/d638e6a3dbed4a9f86e26cdad0f651ce/49/0">AP Photo/J. Scott Applewhite</a></span>
</figcaption>
</figure>
<h2>Free trade and tariffs</h2>
<p>The erosion of American manufacturing became a hot-button issue during the 2016 election. And for good reason. Total employment in manufacturing <a href="https://fred.stlouisfed.org/series/MANEMP">has fallen by 25 percent</a> since 2001, putting about 4.5 million workers out of a job.</p>
<p>Members of <a href="https://www.nytimes.com/2016/07/30/us/politics/in-time-of-discord-bashing-trade-pacts-appeals-to-both-parties.html">both parties now agree</a> that free trade is largely to blame for this decline. <a href="https://www.reuters.com/article/us-usa-trump-jobs-idUSKBN1612DQ">Off-shoring</a> and <a href="https://www.cnbc.com/video/2017/02/23/trump-all-our-trade-deals-are-unbelievably-bad.html">“bad” trade deals</a> are cited as evidence that trade no longer serves America’s interests. </p>
<p>The Trump administration’s solution is tariffs. In recent months, entry barriers have been erected, first to protect <a href="https://www.reuters.com/article/us-trump-effect-solar-insight/billions-in-u-s-solar-projects-shelved-after-trump-panel-tariff-idUSKCN1J30CT">solar panels</a> and <a href="https://www.nytimes.com/2018/01/22/business/trump-tariffs-washing-machines-solar-panels.html">washing machines</a> in January and then <a href="https://theconversation.com/tariffs-wont-save-american-steel-jobs-but-we-can-still-help-steelworkers-93104">steel and aluminum</a> in March.</p>
<p>Although he’s fighting these trade battles with many partners, including Canada and Europe, most of Trump’s attention is directed toward China. He claims that China <a href="https://www.cbsnews.com/news/trump-accuses-china-eu-of-currency-manipulation-and-dollar-weakens/">manipulates its currency</a>, <a href="https://www.cnbc.com/2018/04/24/the-theft-of-intellectual-property-is-driving-trumps-trade-battle.html">fails to protect</a> intellectual property and <a href="https://www.whitehouse.gov/briefings-statements/president-donald-j-trump-standing-american-innovation/">stunts economic innovation</a>. Sweeping tariffs – beginning with a <a href="https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/june/ustr-issues-tariffs-chinese-products">25 percent increase on $34 billion</a> of Chinese imports – are an attempt to combat those issues.</p>
<p>Trump has said <a href="https://www.cnn.com/2018/08/01/politics/us-china-trade-tariff-war/index.html">another $200 billion</a> in tariffs are ready to go – and that he’s even <a href="https://www.cnbc.com/2018/07/19/trump-says-hes-ready-to-put-tariffs-on-all-505-billion-of-chinese-.htm">prepared</a> to tax everything China sends to the U.S.</p>
<p>Unfortunately, there are several reasons to think that tariffs will only harm those Trump wants to protect.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=432&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=432&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=432&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=543&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=543&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230627/original/file-20180803-41327-1n5dt5z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=543&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some U.S. manufacturers are feeling the impact of tariffs of up to 25 percent on some foreign imports.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Trade-Tariffs/66c46d1831a34192a7ff853c6f55f89e/133/0">AP Photo/John Raoux</a></span>
</figcaption>
</figure>
<h2>Tariffs raise prices for consumers</h2>
<p>The purpose of a tariff is to help domestic companies. </p>
<p>Tariffs are a tax on imports. As taxes go up, so do the prices of foreign goods. Consider the metal tariffs. Foreign imports of steel and aluminum became more expensive overnight – to the tune of 25 and 10 percent, respectively. Higher prices drive down consumption of foreign goods while bolstering demand for domestic equivalents. </p>
<p>Unfortunately, protecting a few narrow industries can generate much broader costs. Not least, consumers now have to pay more for everyday goods. </p>
<p>Trump’s tariffs on Chinese imports go far beyond steel and aluminum and affect a wide variety of basic products, from consumer electronics to shoes and apparel. </p>
<p>That’s not a problem for higher earners who can absorb the extra costs. But, for those with more limited incomes, who are especially vulnerable to tariff increases, price hikes can quickly gobble up take-home pay.</p>
<p>Basic necessities such as <a href="https://piie.com/blogs/trade-investment-policy-watch/tariffs-hit-poor-americans-hardest">food and clothing</a> make up a <a href="https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2014-economic-commentaries/ec-201418-income-inequality-and-income-class-consumption-patterns.aspx">larger share</a> of working-class household expenditures when <a href="https://www.marketwatch.com/story/low-income-families-spend-40-of-their-money-on-luxuries-2017-06-28">compared to higher-income families</a>. And most of those products are imported. Foreign producers make up an overwhelming percentage of sales of many basic goods, such as <a href="http://www.mcall.com/business/retail/mc-biz-shoes-imported-tariffs-20180724-story.html">shoes</a>. In fact, one manufacturing industry group <a href="http://www.americanmanufacturing.org/press-releases/entry/fact-sheet-wal-marts-made-in-america-pledge">reports</a> that 80 percent of Walmart’s suppliers are housed across the Pacific. </p>
<p>One <a href="https://voxeu.org/article/us-tariffs-are-arbitrary-and-regressive-tax">2017 paper</a> estimated that a 10 percent across-the-board increase in tariffs on imported goods would cost the poorest 20 percent of earners $300 a year. </p>
<p>That’s a meaningful chunk of the <a href="https://www.taxpolicycenter.org/statistics/household-income-quintiles">less than $13,000 earned</a> by the poorest U.S. households in 2015. Moreover, Trump’s first round of tariffs weren’t the 10 percent used in the study. They are 25 percent. </p>
<p>And the president isn’t stopping there. While the White House initially threatened a 10 percent tariff increase on the next $200 billion of goods he’s targeting, <a href="https://www.bloomberg.com/news/articles/2018-07-31/u-s-said-to-plan-higher-tariff-on-200-billion-of-china-imports">officials are reportedly considering</a> raising that to 25 percent. </p>
<p>Taken together, this means the real impact of tariffs on household incomes could be more than double earlier estimates.</p>
<h2>Tariffs raise prices for companies</h2>
<p>Tariffs also have negative consequences for American producers that rely on foreign inputs. </p>
<p>The metals tariffs, for example, mean that manufacturers of cars, aircraft and tractors all have to pay more to produce their goods. Hence the <a href="https://www.bloomberg.com/news/articles/2018-03-06/will-trump-tariffs-help-steel-in-america-s-rust-belt-quicktake">vocal opposition</a> to Trump from companies such as <a href="https://www.usatoday.com/story/money/cars/2018/07/25/gm-ford-fiat-chrysler-trump-tariffs/827983002/">Ford</a> and <a href="https://www.cnbc.com/2018/07/16/boeings-ceo-muilenberg-worried-about-trump-tariffs-and-trade-restrict.html">Boeing</a>. Their costs are now going up, endangering their competitiveness. </p>
<p>What this also means is that tariffs put jobs at risk – far more than they help protect. </p>
<p>Trump’s recent steel and aluminum tariffs were said to <a href="https://qz.com/1297697/trumps-steel-tariffs-will-cost-the-us-400000-jobs-says-economists-now/">benefit as many as 400,000 workers</a>. But <a href="https://qz.com/1293821/trump-trade-war-146000-us-job-will-be-lost-to-steel-tariffs/">10 times as many workers</a> – 4.6 million – are employed in industries that rely on metals as a core input. </p>
<p>The comparison is even starker for solar panels. About <a href="https://www.seia.org/news/presidents-decision-solar-tariffs-loss-america">2,000 workers</a> directly manufacture solar panels in the United States. However, <a href="https://www.usatoday.com/story/money/business/2018/01/22/trumps-30-tariff-imported-solar-panels-may-cost-jobs/1056440001/">260,000 work in related industries</a> such as installation and maintenance. Those workers depend on a thriving solar market – a market that has <a href="https://thinkprogress.org/solar-prices-are-dropping-so-fast-it-is-muting-the-impact-of-trump-tariffs-ceo-says-b6adb4e04ea0/">stagnated</a> since the tariffs.</p>
<p>If one wants to count jobs, the numbers simply don’t add up to a net benefit for the U.S. economy.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=424&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=424&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=424&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=532&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=532&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230628/original/file-20180803-41338-14wpsvs.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=532&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Farmers and agricultural economists worry that Trump’s trade policies will cost farms billions of dollars in lost income and force some out of business.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/US-China-Tariffs-Farming/638ac661218d4416a120930f7029e36f/94/0">AP Photo/Nati Harnik</a></span>
</figcaption>
</figure>
<h2>Tariffs make it harder to do business abroad</h2>
<p>Finally, trade protectionism is a two-way street. </p>
<p>Beijing wasted no time in responding to Trump’s tariffs, announcing duties of 15 percent to 25 percent on <a href="https://piie.com/blogs/trade-investment-policy-watch/chinas-retaliation-trumps-tariffs">nearly $45 billion</a> of U.S. exports to China, mostly agricultural products. And <a href="https://www.bloomberg.com/news/articles/2018-08-03/china-plans-tariffs-on-60-billion-of-imports-to-counter-trump">more will be coming</a> if the war escalates, with some of the highest tariffs being put on food products. </p>
<p>Of course, targeting agrarian goods is a strategic decision. Agriculture is one of the United States’ few remaining export-oriented sectors. And, since China is the <a href="https://www.fas.usda.gov/data/top-markets-us-agricultural-exports-2017">second-largest</a> buyer of U.S. agricultural exports, farmers are <a href="https://theconversation.com/american-farmers-want-trade-partners-not-handouts-an-agricultural-economist-explains-100795">particularly vulnerable</a> to retaliation. If a country wants to hit the U.S. economy where it hurts, target agriculture.</p>
<p>China did exactly that, hitting U.S. producers of soybeans, corn, poultry and beef particularly hard. As a result, agricultural workers will find it more difficult to make a living in a sector where incomes <a href="https://www.bls.gov/opub/mlr/2014/article/agriculture-occupational-employment-and-wages.htm">have historically lagged behind</a> the national average of all industries. </p>
<p>And poorer areas of the country will be harder hit than others. Three of the states that are the <a href="https://www.scmp.com/news/china/diplomacy-defence/article/2154014/us-china-trade-war-begins-beijing-strikes-back-tariffs">most vulnerable to retaliation</a> – Louisiana, Alabama and South Carolina – all have per capita incomes <a href="https://www.bea.gov/iTable/iTable.cfm?reqid=70&step=10&isuri=1&7003=200&7035=-1&7004=sic&7005=1&7006=xx&7036=-1&7001=1200&7002=1&7090=70&7007=-1&7093=levels#reqid=70&step=10&isuri=1&7003=1000&7004=naics&7035=-1&7005=1&7006=xx&7001=11000&7036=-1&7002=1&7090=70&7007=-1&7093=levels">far below</a> the national average.</p>
<p>That means that poorer households, in poorer states, face the greatest threat if export-dependent agricultural companies can’t do business with one of their most important trade partners.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230629/original/file-20180803-41369-14ep6ld.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The U.S. could slap tariffs on more than $500 billion in imported Chinese goods. Beijing imported just $130 billion in U.S. goods last year.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/China-US-Beijing-Trade-Options/f8b6f807c6224e29a3e983c7880ff267/183/0">AP Photo/Ng Han Guan</a></span>
</figcaption>
</figure>
<h2>The bigger picture</h2>
<p>This is not to say that removing all trade barriers and opening the U.S. economy to all comers will solve the problems facing working-class and poorer Americans. </p>
<p>No one argues that trade is cost-free. Some industries inevitably contract due to foreign competition. And workers in those industries <a href="https://realmoney.thestreet.com/articles/12/03/2016/no-overstatement-structural-unemployment-biggest-economic-threat">aren’t easily employed</a> in the new jobs that are created. </p>
<p>But there’s something else that costs jobs, too: <a href="http://time.com/money/5344327/donald-trump-tax-cut-jobs-trade-war/">trade wars</a>. </p>
<p>As tensions continue to escalate, poorer households, already <a href="http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/">struggling to keep up</a>, will face additional downward pressure on their incomes. That’s bad news for the workers whom Trump promised to help.</p><img src="https://counter.theconversation.com/content/100702/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeffrey Kucik does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The president says he’s fighting his trade war because a generation of free trade has failed working-class Americans. An economist explains why tariffs will only make things worse.Jeffrey Kucik, Assistant Professor of Political Science, University of ArizonaLicensed as Creative Commons – attribution, no derivatives.