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Trump did not make American Industry great again

27.10.2020

Trump has failed with his campaign promises to achieve complete revitalization of the US manufacturing industry. His economic policy has not led to any substantial improvement. Even the industries that enjoyed particular protection by the Trump administration's trade policy are not showing extraordinarily strong developments. In the automotive industry, the situation has actually deteriorated somewhat.

"Donald Trump has not been able to boost either production or employment in the manufacturing industry as a whole or in the sectors he protected. Positive trends have already emerged during the Obama administration or are due to a cyclical recovery. The upward trend in the automotive industry even weakened under Trump's America First policy," said Kiel Institute economist Klaus-Jürgen Gern on the occasion of a current analysis (Gern, Hauber: "Development of the US industry: No Trump effect discernible" (in German)).

While US industrial production in the years 2017 to 2019 grew by a total of 7.2 percent, which is a relatively high rate compared to other G7 countries, this can partly be explained by the cyclical recovery from the North American industrial recession in 2015 and 2016. It was triggered by the oil price crash, which put pressure on the US fracking industry in particular.

Mediocre growth of industrial production when adjusted for the cycle

Adjusting for differences in the economic cycle by calculating growth over the period from 2014 to 2019, the increase in US industrial production is only average by international standards at 4.2 percent.

Trump's rhetoric and actions focused on the steel and aluminum industries, for which he imposed punitive tariffs in 2017, as well as the automotive industry, for which the newly negotiated NAFTA agreement stipulated higher local content requirements.

None of these sectors showed a particularly strong performance during the Trump years. In the steel industry, only the loss of output experienced in the 2015/16 recession was recovered and the level of the (Obama-) years 2010 to 2014 was reached again. The production level of the aluminum industry and the automotive industry remained broadly constant over the Trump years.

No employment boom

Trump has also not managed to generate the pledged employment boom in any of the three industries. In the aluminum industry, the number of employees stagnated, while in the steel industry employment rose only slightly, in line with the overall economy. The positive employment trend in the automotive industry began as early as 2010 and slowed down under Trump. The share of the three sectors in total employment in the US remained unchanged and extremely low at 0.3 percent.

"Trump apparently did not provide major positive impulses for the US industry. Supposedly good figures are originating in the years before he took office and due to a robust overall economy. Protectionist strategies cannot provide sustained growth impulses. It is more promising to put confidence on those economic activities in which the US economy has a revealed comparative advantage in international competition. The coming president of the United States would, however, need to better cushion the associated structural change, for example by targeted investments in infrastructure and education in the particularly affected regions".

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