The article builds on a voting trend in the recent Presidential elections and shows how the American industry has moved past a certain point of no return. The area under discussion is the Rust Belt, which involves regions in the northeast and midwest of the US - major cities in states including Ohio and Pennsylvania among others - that once had a powerful economy owing to their industrial sector. The auto, steel and coal industries have declined in recent years and Yakabuski believes that this may be the cause of Trump's triumph in the Rust Belt states which include Michigan, a state that has not voted for a Republican for over 25 years. His working-class supporters in those states may have been convinced by his opposition to NAFTA, the bill that he believes to have caused the downfall of the industrial sectors in the Rust Belt.
Yakabuski further attempts to explain how Trump's efforts in this regard will turn out to be insufficient. Free trade, he argues, is the least of the problems of the Rust Belt. Automation causes the loss of much more jobs while on the other hand, free trade generates jobs in the export-competitive sectors. Trump would attempt to renegotiate or dissolve NAFTA and then attach 35% tariffs on Mexican goods and 45% tariffs on Chinese goods. The former tariff would end up damaging the American exports as well while the latter would harm low-income Americans.
The President-Elect can attempt to increase the life of some coal-plants but that would be the only effective measure, and a temporary one at that. Therefore, it is difficult to see the Rust Belt rising again industry-wise as, despite what the voters in those states believe, there is little the new President can do to cater to the needs of the old economy.
Article link: http://www.theglobeandmail.com/report-on-business/rob-commentary/trump-cant-resuscitate-the-rust-belt-and-his-voters-may-well-know-it/article32801941/
It is going to be interesting to see if Trump is actually going to increase the tariffs for Mexican and Chinese goods, which will probably lead to a big decrease in Importations and an increase in net exports. But also see if this will collapse the economy or if it is actually going to benefit the economy since this will create jobs but it might decrease the growth of the economy for a while.
ReplyDeleteIf Trump imposes tariffs on Mexican and Chinese goods, it will do more harm than good. It might result in a decrease in GDP and the unemployment will increase as export sector will slowdown.
ReplyDeleteThis article makes a great point about how NAFTA has impacted the rust belt states that have been directly affected by the exit of the auto, steel, and especially coal sectors.
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