Donald Trump promised to tear up trade deals and bring back jobs to the US rust belt lost to globalization. Pandemic aside, the American economy has boomed since 2016, but how much is down to the president's policies?
In the 2016 US presidential election, large swaths of working-class Barack Obama voters switched their support to Donald Trump, who campaigned on a promise to "Make America Great Again."
Vowing to drain the Washington "swamp" that he said had sold millions of US jobs overseas, the billionaire businessman and reality TV show host struck a chord with voters, who had, for years, tolerated the offshoring of high-paying jobs, stagnant or falling wages, and rising job insecurity.
By August 2018, Trump was boasting that half a million manufacturing jobs had been created during the first two years of his presidency and that his aggressive, protectionist policies, which included tearing up trade agreements, imposing tariffs on foreign aluminum and steel and the wider US-China trade war, were benefiting the American people.
A report by the Economic Policy Institute published last month contradicted his claims, however. It found that far from reenergizing the so-called Rust Belt — former industrial areas of the northeastern US that had seen a sharp economic decline since the 1990s — more manufacturing jobs left the US than were created during Trump's first two years in office.
The Washington-based think tank wrote: "President Trump's erratic, ego-driven and inconsistent trade policies have not achieved any measurable progress, despite the newly combative rhetoric. On top of that, COVID-19 — and the administration's mismanagement of the crisis — have wiped out much of the last decade's job gains in US manufacturing."
From January to July this year, nearly 750,000 US manufacturing jobs were lost, adding weight to accusations that Trump is an industrial president in a postindustrial country. After all, manufacturing makes up just 11% of gross domestic product (GDP) - the lowest level since World War II.
As the president bids for a second term in the White House, he faces derision for his inconsistent response to the coronavirus pandemic. So, trailing his Democratic rival Joe Biden, Trump is playing up the economic successes of his first term.
US stock markets, he regularly boasts, have skyrocketed under his leadership, even after the initial shock of the pandemic lockdown. Since he took office in January 2017, the Dow Jones is up nearly 40% and reached a record high of 29,570 in February this year, while the NASDAQ has more than doubled in value.
The coronavirus pandemic came at an untimely moment for US President Donald Trump, who's seeking reelection later this year
Many economists, however, say the stock market boom began under his predecessor Barack Obama and was fueled by trillions of dollars in quantitative easing by the US Federal Reserve and stock buybacks by the likes of Apple, Microsoft and Google's parent, Alphabet. Main Street hasn't benefitted from the meteoric stock market rise as much as corporate America.
"Pre-pandemic: In terms of growth, employment gains, and inflation, the US economy has performed about the same as under the Obama Administration," Joel Prakken, chief US economist at IHS Market, told DW. Asked what economic successes Trump can take credit for, he added: "Little, if any."
Tax cuts are another of Trump's proudest achievements. In 2017, the top individual tax rate was cut from 39.6% to 37% until 2025, while corporate taxes were reduced permanently from 35% to 21%. Prakken said the cuts had helped boost the stock market by 5-7% but had also led to a "significant increase in the US budget deficit with potential negative long-run implications for the US standard of living."
In a report shortly after the tax package went into effect, the nonpartisan Tax Policy Center wrote that the top 20% of Americans enjoyed more than 60% of Trump's tax savings. Economists said any boost to consumer spending and business investment was shortlived and that little of the benefit had trickled down to low-income Americans. Despite this, Trump has promised to make the individual tax cuts permanent if reelected and plans to slash payroll taxes.
Trump has often stressed his "America First" trade stance — including the levying of billions of dollars of tit-for-tat tariffs with China — which he said had gained an unfair advantage over the US. The president insists his policies have pressured multinationals to bring jobs back home and forced other nations to open their restricted markets to US firms. The tax cuts provided further encouragement, he said.
"Tariffs on China haven't done much for the manufacturing sector, but have undercut farm income," Prakken told DW, adding that there hasn't been a notable shift in direct foreign investment coming into the US from Trump's policies, while thousands of American farmers went out of business when Beijing restricted US agricultural imports.
In July, NAFTA 2.0 — an update of the 25-year-old North American Free Trade Agreement between the US, Canada and Mexico — came into force. But despite promises that it would bring 180,000 new US jobs, the trade deal has no provision to stop work being outsourced to low-cost Mexico. Car manufacturers have continued to relocate their US plants across the border.
Trump's saving grace could be the flexibility of the US economy, which has quickly rebounded from the pandemic where it saw a record 40 million lockdown layoffs. Many economists, however, say the next seven weeks is insufficient time for Americans to regain their pre-pandemic economic confidence.
"Most models of the economy's impact on US presidential elections stress the role of [low] unemployment and income growth 6-9 months before the election," IHS Markit's Prakken explained. "So, the recovery is probably coming too late to help the president's reelection chances, especially as some high-frequency data suggest a slowing in the recovery following a summer 'bounce.'"