The protectionist trade war implemented by American president Donald Trump was in part designed to bolster employment among the American workforce. Alas, new research from the University of Geneva suggests it might have had the opposite effect.
The researchers attempted to quantify the impact of the president’s economic policies on unemployment and welfare across the Organisation for Economic Co-operation and Development (OECD) area. Rather than enhancing the situation in the US at the expense of other nations, however, the study finds that it had a negative impact on employment at home too.
The researchers believe their work is one of the few economic analyses of Trump’s economic policies to focus on unemployment as a metric of its impact.
“The unemployment rate is nevertheless an important indicator of a country’s economic health,” the researchers say. “That is why we have been particularly interested in the evolution of unemployment figures in OECD countries.”
Employment prospects
The research examined both the repealing of the North American Free Trade Agreement (NAFTA) and the creation of 20% bilateral tariffs between the United States and Mexico, and found that it reduced welfare by 0.31% in America and 6.6% in Mexico.
“Furthermore, this policy would increase unemployment by 2.4% in the United States and 48% in Mexico!,” the researchers explain.
They continue by exploring the particular impact on the automotive industry, and a similarly dire outlook was discovered for a trade war on imports in the sector on the welfare of citizens in both America and Mexico.
The authors believe that their work highlights that whilst Trump’s protectionism has ostensibly been done in the name of Americans and American workers, it’s actually having a negative impact on them in the long-term. What’s more, it’s also having a negative impact on the country’s trading partners.
“In this way, we show that protectionism often hides negative aspects that only emerge over time, sometimes after the end of a president’s term of office, who can then be satisfied with the results obtained when he was in power,” they conclude.
