Trump's Lump of Coal

For many, this holiday shopping season is feeling pinched. For the last several years, prices for low-end products have been rising at a faster rate than prices for higher grade versions, pinching the poorest shoppers hardest. In the early months of this year, overall inflation dropped to its lowest rate since the pandemic-fueled bout of price increases that peaked in 2022, which was a promising sign. But after steep tariffs went into effect in the spring, inflation ticked up again. 

The most vocal tariff promoters, President Trump chief among them, tell us that their tariffs are meant to fix the trade deficit. The U.S. buys more from the rest of the world than the rest of the world buys from us. Trump and his allies say this asymmetry means our country is losing an international competition. But if we consider the whole nation as a single unit, running a trade deficit means we are winning. 

If many Americans feel like losers, it is because of domestic inequality, not the trade deficit. 

Imagine you had a friend who lived across town and this friend kept making things for you – a shirt, a set of gardening tools, a phone, anything and everything, but always something you wanted – and shlepped it over to your house to give it to you. Occasionally, but not nearly as often, you made something for your friend. Maybe you’d be embarrassed by your failure to reciprocate, but you couldn’t complain to your spouse or roommates that this friend is screwing you over. The United States’ trade deficit is like this imagined scenario. 

How many hours of Bangladeshi and Vietnamese and Chinese and other overseas workers’ lives are devoted to supplying our needs, our comforts, our frivolous whims? A lot. How many hours of our lives do we devote to them in turn? Not a lot. In Bangladesh and Vietnam and China, workers average up to 33% more hours on the job as American workers; they do that work for a small fraction of the income; and then they send us more of the fruits of their labor than we send to them.

How many tons of natural resources are extracted from elsewhere in the world and delivered to our shores? A lot. How many tons are extracted from U.S. lands and sent abroad? Much less. In 2021, the four billion metric tons worth of materials from around the world that went into the imports we consumed was almost three times the mass of the materials that went into goods we provided to others. 

We put in less work and extract less from our land than others, yet we get more stuff. The trade deficit means we win. 

If that feels bad, it is because the United States is not a single community of shared interest. Imagine that scenario again with your friend across town delivering lovely things to your house. Now imagine that one of the people you live with starts saying to you, “Well, since you’re getting these gifts from our friend across town, I don’t need to share my stuff with you. And since getting gifts frees up a lot of your time, you can do more tasks for me.” That’s essentially what the highest income Americans have been saying to the rest of the U.S. population for more than a generation. 

Over the past several decades, more and more manufacturing moved to regions of the world with lower wages and weaker environmental standards. This allowed Americans to furnish at least some of their needs at bargain-basement prices while people far away did the hard work and experienced the local environmental harms. That perhaps seemed like a good deal at first, if you weren’t one of the first people who lost your job when a U.S. factory closed and you didn’t care to ask questions about how your goods got made. 

Way more people in the U.S. consume manufactures than produce them. The number of people employed in manufacturing in the U.S. peaked at about 19.4 million in 1979, fell a little bit in the 1980s and 1990s, then plummeted between 2000 and 2010. Since 2010, manufacturing employment has oscillated around roughly twelve million. Since most of us did not work in manufacturing in the first place, a majority of us could have gained from moving manufacturing to parts of the world where the workers would work for a fraction of the pay U.S. workers were used to getting. We could also have taken care of displaced factory workers.

Instead, the economic pain felt by the first factory workers to lose their jobs spread. Since 2000, when manufacturing employment began its precipitous fall, the nation in the aggregate has gotten richer, but income for the bottom 50% of the population has, on average, fallen. Meanwhile, income growth for the top 10% has been nearly double the national average; for the top 0.01%, it has been about four times the average. Americans with higher incomes hoard their wealth and consume services performed by Americans with lower incomes, who in turn survive on products made by a global labor force that is paid even less.

Millions of American workers are getting screwed over. It isn’t workers who work for even less in other countries doing the screwing. 

High tariffs can reduce the trade deficit by making imported goods unaffordable for millions of Americans who already struggle to make ends meet, cutting off the flow of goods the rest of the world was in the habit of sending us. The policy gift bag Trump is offering also includes domestic changes that demolish the social safety net, weaken workers' bargaining power, and shift the tax burden downward. The card accompanying this sack of coal contains a simple message: “Merry Christmas, losers.”