Economic strategist and author David P. Goldman is concerned about the state of American manufacturing. Describing the sector as critical to both the country’s economic standing and strategic position in a recent piece, he calls for a raft of measures—including some aptly described as industrial policy—to shore up American industry. This restoration of domestic manufacturing, he adds, will have the added benefit of reducing the US trade deficit.
The argument’s premise, however, is deeply flawed. American manufacturing is thriving, and the trade deficit is a (arguably mismeasured) statistic with little relation to a country’s prosperity. Goldman is proffering solutions in search of a problem.
Before getting to that though, it’s first worth highlighting several things he gets right. Goldman’s numerous criticisms of tariffs in general—which he describes as an example of a policy answer that is simple, clear, and wrong—and their application to China in particular are spot-on. Despite raising tariffs on Chinese goods by 25 percent in 2019, Americans continue to import hundreds of billions of dollars’ worth of products from China. And to the extent Chinese products have been displaced by imports from other countries, many of them feature extensive linkages with Chinese supply chains. The imported goods may not be stamped “Made in China,” but the country is still critical to their production.
Claims of a large-scale US-China decoupling are wishful thinking by those who may be well-intentioned but fail to grasp these realities.
Read the rest of this post →