See also: “China Tariff Costs by Congressional District” by Daniella Zessoules
The Trump administration’s 2017 tax cuts are overwhelmingly benefiting corporations at the expense of working families.1 They have resulted in large business investments overseas and virtually none at home. The apple doesn’t fall far from the tree on trade policy: Business interests win, while farmers, workers, consumers, and the environment bear the costs. As is often the case, the Trump administration has created noise and chaos through conducting trade wars on Twitter but has accomplished virtually nothing in the way of restructuring the rules of trade to benefit working families and protect the environment.
The Trump administration’s new North American trade agreement
NAFTA 2.0 looks a lot like NAFTA 1.0
- Despite calling the North American Free Trade Agreement (NAFTA) “the worst Trade Deal in the history of the U.S.A.,”2 President Donald Trump is essentially reaffirming it under a new name.
- Among the few changes that exist in the new iteration of the agreement, the United States-Mexico-Canada-Agreement (USMCA), those that benefit big corporations are concrete and enforceable, while those that would supposedly benefit workers are just unenforceable words on paper.
Locks in higher drug prices by extending special protections for Big Pharma
- By making it impossible for the United States to reduce the exclusivity period for biologic drugs—a period of time during which large pharmaceutical companies are granted market and regulatory protection from other companies, including generic drug companies—below the 10-year level set in the agreement, the USMCA locks in high prices for already extraordinarily expensive drugs across all three signatory countries.3
- This will effectively make it easier for Big Pharma to raise the prices of life-saving medicines across most of the North American continent.4
Lacks strong, enforceable labor standards that would help level the playing field for U.S. workers
- The USMCA has failed to include strong and enforceable labor standards, reinforcing the Trump administration’s demonstrated disregard for workers’ interests.5
- As currently written, the USMCA allows Mexico a clear path to continue its low-wage policies that negatively affect workers in Mexico, who will continue to be paid subminimum wages by companies, have limited collective bargaining rights, and receive abysmal basic human rights protections, as well as those in the United States.6
- Large American and foreign businesses benefit from this yawning gap in enforcement; they will continue to have a convenient low-wage location in the North American market. The result will be continued downward pressure on the wages of American workers.7
Fails to address the environment and climate crisis
- Despite the strong risk of a climate change crisis as early as 2040,8 the USMCA entirely ignores the enormous threat that climate change poses to the economy and society.
- The deal fails to incorporate standards or enforcement on domestic environmental laws and key international agreements.9
- Even one of the agreement’s only sensible components—dialing back investor-state dispute settlement, which gives foreign corporations the special right to challenge government actions in private forums instead of domestic courts —is incomplete, maintaining special giveaways to the oil and gas sectors, which have contracts with the Mexican government.10
- The USMCA’s environmental failure isn’t just bad for the climate; it’s also bad for jobs and wages, as companies will continue to move jobs offshore to the lowest-standard venue.11
- The trade agreement’s lack of environmental and sustainability standards should come as no surprise alongside the Trump administration’s damaging environmental agenda.12
The trade war with China
An expensive sacrifice for American families and businesses
- The Federal Reserve Bank of New York estimates that the China tariffs already in effect will cost the average household $831 per year, thereby harming many American families.13 Retaliatory tariffs have also caused major disruptions to certain sectors in the U.S. economy, including farming.14
- The latest round of tariffs—part of which will go into effect September 1, with a second wave hitting in December—will perpetuate the compounding harms on consumers and working people. By imposing tariffs on the remaining $300 billion of goods imported from China, the Trump administration is effectively adding taxes on goods such as laptops, smartphones, clothing, toys, footwear, and more.15
Nothing to show for the administration’s pro-corporate strategy
- President Trump has nothing to show for his trade war policies, but they still manage to harm American workers and families.
- Though China does pose competitive and national security threats,16 Trump has shown that he doesn’t have a real strategy to address them.
- The administration has shown that its real priorities in launching the trade war and negotiating with China are to protect corporate intellectual property interests, secure market access for Wall Street financial firms, and counter China’s industrial policies. Some of these concerns pose serious economic and national security risks to the United States. However, by making purchase agreements a major focus, the administration appears willing to allow China to buy its way out rather than create fundamental policy change. Moreover, wins exclusively on these fronts—legitimate as some may be—fail to counter low-road labor and environmental strategies that undermine middle-class economic security.17
Nothing for American workers who need a level playing field
- The Trump administration has acknowledged that it is not considering low-wage competition or environmental standards in its China negotiating strategy.18 Yet China continues to permit a low-standard form of trade competition. Low-road forms of globalization boost corporate leverage to drive down wages and undermine workers’ ability to be part of a middle class—in both the United States and China.19
The Trump administration’s only legislative accomplishment is a large tax cut whose lasting beneficiaries were the largest multinational companies. Combined with the middle-class tariff tax resulting from the trade war with China, as well as the Big Pharma-friendly USMCA, these policies show just how upside-down the administration’s economic policy priorities are.
Daniella Zessoules is a research assistant for Economic Policy at the Center for American Progress.
- Seth Hanlon and Galen Hendricks, “Americans Have Rejected the Tax Scam—Congress Should Too,” Center for American Progress, September 26, 2019, available at https://www.americanprogress.org/issues/economy/news/2018/09/26/458636/americans-rejected-gops-tax-scam-congress/. ↩
- Donald J. Trump, @RealDonaldTrump, June 8, 2019, 6:43 a.m. ET, Twitter, available at https://twitter.com/realDonaldTrump/status/1137354486698192896. ↩
- Marc Jarsulic, Andy Green, and Daniella Zessoules, “Trump’s Trade Deal and the Road Not Taken: How to Evaluate the Renegotiated NAFTA” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/02/01/465744/trumps-trade-deal-road-not-taken/. ↩
- Veronika J. Wirtz, Warren A. Kaplan, and Kevin Gallagher, “’Big Pharma’ is the big winner of the USMCA,” The Hill, June 23, 2019, available at https://thehill.com/opinion/healthcare/449741-big-pharma-is-the-big-winner-of-the-usmca. ↩
- David Madland and others, “President Trump’s Policies Are Hurting American Workers,” Center for American Progress Action Fund, January 26, 2018, available at https://www.americanprogressaction.org/issues/economy/reports/2018/01/26/168366/president-trumps-policies-hurting-american-workers/. ↩
- Owen E. Herrnstadt, “Why NAFTA’s 2.0 current labor provisions fall short,” Economic Policy Institute, March 28, 2019, available at https://www.epi.org/blog/why-naftas-2-0-current-labor-provisions-fall-short/; The Labor Advisory Committee on Trade Negotiations and Trade Policy, “Report on the Impacts of the Renegotiated North American Free Trade Agreement” (Washington: 2018), available at https://ustr.gov/sites/default/files/files/agreements/FTA/AdvisoryCommitteeReports/Labor%20Advisory%20Committee%20on%20Trade%20Negotiations%20and%20Trade%20Policy%20(LAC).pdf. ↩
- Jarsulic, Green, and Zessoules, “Trump’s Trade Deal and the Road Not Taken.” ↩
- Coral Davenport, “Major Climate Report Describes a Strong Risk of Crisis as Early as 2040,” The New York Times, October, 7, 2018, available at https://www.nytimes.com/2018/10/07/climate/ipcc-climate-report-2040.html. ↩
- Jarsulic, Green, and Zessoules, “Trump’s Trade Deal and the Road Not Taken.” ↩
- Ibid. ↩
- Ibid. ↩
- Luke Bassett, Kristina Costa, and Lia Cattaneo, “Burning the Data: Attacks on Climate and Energy Data and Research” (Washington: Center for American Progress, 2018), available at https://www.americanprogress.org/issues/green/reports/2018/06/13/452065/burning-the-data/. ↩
- Mary Amiti, Stephen J. Redding, and David E. Weinstein, “New China Tariffs Increase Costs to U.S. Households,” Federal Reserve Bank of New York, May 23, 2019, available at https://libertystreeteconomics.newyorkfed.org/2019/05/new-china-tariffs-increase-costs-to-us-households.html. ↩
- U.S. Department of Agriculture Foreign Agricultural Service, “GATS Home,” available at https://apps.fas.usda.gov/gats/default.aspx (last accessed August 2019). ↩
- David Shepardson and David Lawder, “Trump delays tariffs on Chinese cellphones, laptops, toys; markets jump,” Reuters, August 13, 2019, available at https://www.reuters.com/article/us-usa-trade-china-tariffs/trump-delays-tariffs-on-chinese-cellphones-laptops-toys-markets-jump-idUSKCN1V31CX. ↩
- Melanie Hart and Kelly Magsamen, “Limit, Leverage, and Compete: A New Strategy on China” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/security/reports/2019/04/03/468136/limit-leverage-compete-new-strategy-china/. ↩
- Andy Green and Daniella Zessoules, “U.S. Trade Policy in North America, China, and Beyond: 4 Questions for the Trump Administration” (Washington: Center for American Progress, 2019), available at https://www.americanprogress.org/issues/economy/reports/2019/02/27/466705/u-s-trade-policy-north-america-china-beyond/. ↩
- U.S. Senate Committee on Finance, “Hearing on ‘Approaching 25: The Road Ahead for the World Trade Organization’: Questions for the Record for Ambassador Robert Lighthizer, USTR,” March 12, 2019, available at https://www.finance.senate.gov/imo/media/doc/SFC%20WTO%20Hearing%2003.12.19%20QFRs%20Responses%20FINAL.pdf. ↩
- Green and Zessoules, “U.S. Trade Policy in North America, China, and Beyond.” ↩