Donald Trump meant what he said about trade.
When he isn't getting attention for telling demonstrable falsehoods about the size of his inauguration crowd, Trump has been busy filling his administration with people who want to get tough on China, threatening to put tariffs on companies that outsource jobs, and, as he did on Monday, pulling the United States out of big trade deals. Indeed, he officially killed the Trans-Pacific Partnership, and is expected to announce that he wants to renegotiate the North American Free Trade Agreement as well.
How much does this matter? Well, when it comes to the TPP, maybe not as much as you might think for an agreement that would have created a single market for most of the Pacific rim other than China. At least not in economic terms. The U.S. International Trade Commission, after all, estimates that the TPP would have raised our inflation-adjusted incomes only by 0.23 percent — in total — between now and 2032. That's not nothing, but it's pretty darn close. That's because the TPP wasn't really about reducing tariffs. Those are already quite low for the countries involved. It was more about making other countries follow our rules for patents and intellectual property, raising prices for Asian consumers and profits for American companies. That'd be better for our shareholders, but not necessarily for our workers. In all likelihood, it wouldn't change our jobs picture very much for good or ill.
No, the real reason to support the TPP wasn't economics so much as geopolitics. It was about keeping an economic foot firmly planted in China's backyard, and writing the trade rules so they couldn't. If this sounds like a less quantifiable benefit, well, that's because it is. At the same time, though, this kind of logic was a part of almost all our trade deals the past 70 years. Initially, these were about setting a system to promote prosperity abroad so fragile postwar democracies could resist Communist pressure. But even after the Berlin Wall came down, they were still a way to not only open up markets, but also reward countries for reforming their economies like we wanted. As Paul Krugman argued at the time, that was why NAFTA made more sense than any economic model would have told you. If we rejected Mexico's liberalizing government, it might have collapsed — and an anti-American one could have taken its place.
Now, that's not to say that all trade deals are economically irrelevant. They aren't. NAFTA really did move a decent chunk of our manufacturing base south of the border, whether a giant sucking sound accompanied it. And granting China Permanent Normal Trade Relations status in 2000 really did seem to give companies the confidence they needed to shift production there on a far larger scale than they had before, since they no longer had to worry about the risk of tariffs rising.
What we are saying, though, is that the era of big trade deals is over. And that was true even before Trump announced his candidacy before a raucous crowd of paid actors. The simple story is that we've already pushed tariffs about as low as they can go, and all that's left is to negotiate over non-tariff trade barriers. But the problem is that those sorts of things — say, rules about intellectual property or government procurement — are what we used to think of as the sole province of domestic policy. Which is why they can feel like they're infringing on a country's sovereignty. The result is that these new trade deals are more difficult politically and less useful economically than previous ones.
But what's changing with Trump is that we aren't even trying to lead on trade anymore. He doesn't see these deals as a way to win friends and influence people, but rather to win manufacturing jobs and influence his approval rating. That might sound like common sense to some people, but it does leave an opening for other countries — yes, China — to negotiate where we're not. The risk, then, is that globalization might not proceed on our terms or with our values. But there's a greater danger. It's not that Trump won't make further progress on trade, but rather will backtrack on where we are. New trade deals might not help much, but unraveling old ones would hurt. At that point, we wouldn't have the luxury of worrying about whose globalization we had. The answer would be nobody's. And the whole world would be a little bit poorer.
Or as Trump calls it, America would be great again.