A scoop from Washington Post economics reporter Damian Paletta reported Tuesday night that “White House officials working on trade policy were alarmed last month when a top adviser to President Trump circulated a two-page document that alleged a weakened manufacturing sector leads to an increase in abortion, spousal abuse, divorce and infertility.”
The report raised eyebrows on social media as it circulated — a memo so crazy that even members of Trump’s own team found it alarming — but in many respects, it’s well-grounded in recent empirical research.
The underlying issue here is that there’s considerable tension in the White House on trade. The bulk of the Trump economic policy team is composed of very conventional pro-business Republicans and those who lean into the president’s strong protectionist leanings.
During the transition, Trump did make sure to appoint a US trade representative, Robert Lighthizer, who largely breaks with GOP consensus on trade. And then there’s Peter Navarro, an economist with anti-trade views that are way outside the academic consensus, who worked for Trump on the campaign and has been sort of sidelined with an important-sounding title as director of the White House Office of Trade and Manufacturing Policy but little formal job role.
With tensions rising in the ongoing NAFTA revision talks, the intra-administration split may come to a head soon. And it appears that Navarro’s intra-administration adversaries decided his briefing materials were alarming and thus leaked them to the Post with disparaging spin, including the fact that the documents “were presented without any data or information to back up the assertions, and reveal some of the materials the Trump administration reviewed as it was crafting its trade policy.”
The reality, however, is that there is at least some real research support for these claims.
Trade shocks have caused serious social problems
Navarro’s key slide cites a wide range of ills that are associated with a decline in manufacturing, and according to the Post, “a separate sheet claims ‘Socioeconomic Costs’ of the decline of the country’s manufacturing industry, such as ‘Higher Divorce Rate,’ ‘Increased Drug/Opioid Use,’ ‘Rising Mortality Rate,’ ‘Higher Abortion Rate,’ among many others.”
These claims sound alarmist, but they reminded me of some academic research I’ve read over the past couple of years. The way this line of research works, typically, is that it breaks America down into its constituent counties and then looks at which counties were more and less exposed to import competition from China after the establishment of permanent normal trade relations at the start of the 21st century.
- In a 2015 paper, Justin Pierce and Peter Schott find that the decline in US manufacturing employment in highly exposed counties was much larger and faster than policymakers had expected.
- In a 2016 paper, Pierce and Schott find that those highly exposed counties experienced a surge in mortality largely driven by suicides among white men.
- In a 2016 paper, David Autor, David Dorn, and Gordon Hanson find that highly exposed areas saw huge declines in labor force participation and elevated levels of disability insurance usage (presumably Navarro’s “increased welfare payments”).
- In a 2017 paper, the same authors find a declining marriage rate and reduced fertility.
- That paper also cites earlier 2013 research from Elizabeth Ananat, Anna Gassman-Pines, and Christina Gibson-Davis that, while focused on a slightly different issue, does show declining birthrates and rising abortion rates when communities suffer heavy job losses.
- Last, while the 2017 paper from Alex Hollingsworth, Christopher Ruhm, and Kosali Simon on “Macroeconomic Conditions and Opioid Use” isn’t about manufacturing per se, it does conclude that unemployment causes an increase in the opioid addiction rate.
In other words, while Navarro's alarming briefing materials may not have included a full set of citations, his account of the socioeconomic costs of the sudden loss of manufacturing jobs to competition from Chinese imports is at least a plausible read of the literature. The real question about Navarro is whether his policy prescriptions make sense.
How do you un-shock a shock?
Navarro’s strangest belief about trade is his longstanding contention that blocking foreign imports will mechanically raise American gross domestic product. When Adam Davidson profiled Navarro for the New Yorker, Navarro was unable to provide the name of a single other economist who agreed with this diagnosis, largely because the diagnosis is completely wrong and based on a pretty silly error.
Given that, there is considerable reason to doubt that Navarro is drawing the right conclusion from the China Shock literature.
A standard story about allowing an influx of imports is that it makes most people better off, albeit only slightly, since they can now buy cheaper or better stuff. But it also makes some people quite a bit worse off since they lose their jobs to new competition. This makes it very similar to technological innovation. Ubiquitous digital cameras, mostly mounted on smartphones, have made my life a bit better and probably yours too. But they’ve been terrible for the relatively small number of people who used to own or work at film development shops. What we count on, as a society, is that people who lose out in shocks will adjust and move on to other things.
What the China Shock literature says is that China is so big and has led to so much competition across so many industries that American communities’ ability to adjust was overwhelmed — even as the average American was still made better off.
It’s a story, in other words, about change. Specifically too much change coming too quickly. And the question is whether a big new revision in trade policy now would help with that. The China Shock, after all, already happened. A time machine would let us go back and slow the pace at which Chinese imports were allowed into the country, allowing for less disruption. But the sudden imposition of new tariffs or other trade barriers today isn’t the same as a time machine. On the contrary, it would be a new source of change that people would have to adjust to, quite possibly making all these problems worse.