Could a Democratic House Reach a Grand Bargain With Trump on Trade?

Could a Democratic House Reach a Grand Bargain With Trump on Trade?
President Donald Trump’s motorcade leaves Capitol Hill after a ceremony for new Associate Justice Brett Kavanaugh at the Supreme Court, Washington, Nov. 8, 2018 (AP photo by J. Scott Applewhite).

Trade policy had a high profile in the run-up to last week’s midterm elections in the United States. With a blue wave in the House of Representatives and in many states, even as Republicans added to their majority in the Senate, two obvious questions arise. Did the widening trade war with China, and the narrower disputes with Europe and others over steel and aluminum, influence the outcome? And how will Democratic control of the House of Representatives affect U.S. trade policy for at least the next two years?

On the first question, it is difficult to detect a clear pattern linking President Donald Trump’s protectionism with electoral outcomes. On the one hand, Illinois, Iowa and Kansas, which have been hit hard by China’s retaliatory tariffs on U.S. exports of soybeans, corn and pork, saw shifts toward Democrats in key races for governor and the House. On the other hand, North Dakota, which was hit by China’s agricultural retaliation, and Missouri, which had firms hit by the steel tariffs, replaced Democratic senators with Republicans. And it was likely a surprise to Trump that Democrats picked up House seats or governorships in Michigan, Pennsylvania and Wisconsin, which were primary targets of his attacks on trade agreements as job killers in the 2016 campaign.

The problem with trying to use trade policies to sway voters is that they have mixed effects. Steel producers gain from higher tariffs, but all kinds of manufacturers that use steel face higher costs. And no Americans—except maybe lobbyists—are gaining from the retaliatory tariffs imposed by China, Europe and others against U.S. exports. Wisconsin dairy farmers, for example, welcomed the renegotiation of the North American Free Trade Agreement, but they are disappointed that the expanded dairy market access they got in Canada is partially offset by Canada’s retaliatory tariffs against American steel. And Wisconsin-based Harley-Davidson got hammered twice—by higher input costs from the steel and aluminum tariffs, and by the retaliatory tariffs that the European Union imposed in response.

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