Protectionism in the 2016 Election: Causes and Consequences, Truths and Fictions

Cullen S. Hendrix ()
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Cullen S. Hendrix: Peterson Institute for International Economics

No PB16-20, Policy Briefs from Peterson Institute for International Economics

Abstract: The disconnect between the United States’ massive increase in trade exposure and minimal (if any) associated rise in government spending to address trade-related costs is at the heart of the apparent turn toward protectionist politics in the 2016 US presidential election. Protectionist rhetoric is a surrogate for a deeper discussion about the role of the government in an increasingly open economy. Trade makes the United States better off as a whole, but evidence that the costs are unevenly shared is mounting. Trade and technological change have cost many American people their jobs, and social transfers (for unemployment, disability, retirement, and health care) are not closing the gap in their incomes. In this environment, both left- and right-wing populist candidates have been able to gain traction, in large part by attacking free trade. But trade may not be the culprit: Many advanced economies sustain much higher levels of trade exposure and do so with large social expenditures to address the costs. The protectionist turn this election year is the result of neither a sea change in public opinion on trade nor an anti-trade youth in revolt. At root, it is the result of government spending and compensatory policies not keeping up with technological and trade shocks—particularly the China shock—to the US labor market.

Date: 2016-11
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