Senator Kamala Harris and Vice President Mike Pence had an excellent debate last week. However, history will acknowledge that Vice Presidential debates are generally not exciting – except for 1988, when Republican V.P. Candidate Senator Dan Quayle compared himself to former President John F. Kennedy. In a fly’s leap, Democrat Lloyd Bentsen said: “Senator, I served with Jack Kennedy. I knew Jack Kennedy. Jack Kennedy was a friend of mine. Senator, you’re no Jack Kennedy.”
Last week’s debate didn’t really move the election needle. There was indication that Senator Harris gained on favorability while V.P. Pence stayed even. Both candidates were professional, and that was the biggest relief to the viewing audience – given the raucous Trump / Biden Presidential debate that preceded it.
Many pundits felt that the most notable event of the evening was the large fly that landed on Vice President Pence’s hair for 123 long seconds. Social media ran amok with the fly and the internet lit up with numerous snide remarks, funny comments, and political implications. There was even a picture of Candidate Biden holding a fly swatter. Shortly after the debate concluded, the Biden campaign was offering fly swatters with “TRUTH over FLIES” printed on the handle. Reportedly, the campaign sold-out of 35,000 swatters in just a few hours.
During the debate there was an important exchange about China trade that illuminated the stage for fashion retail. After Vice President Pence mentioned job growth related to the economy, Senator Harris countered with the following statement about the trade war with China: “You lost that trade war. You lost it.” She followed with: “What ended up happening is because of a so-called trade war with China…… America lost 300,000 manufacturing jobs. Farmers have experienced bankruptcy because of it. We are in a manufacturing recession because of it.”
For purposes of fact checking Senator Harris, Moody’s Analytics wrote in September 2019: “Since it began in earnest just over a year ago, the trade war with China has cost an estimated 0.3 percentage point in real U.S. GDP and almost 300,000 jobs.” (Note – this was written before COVID-19 kicked in, and before the full weight of the tariffs and store closures hit retail).
In terms of the U.S. Farmers, Senator Harris was also correct with the reference to Chapter 12 bankruptcies in the farm community, which are up 8% and are the highest they have been in 8 years. Farmers have watched exports to China decline in a disastrous manner. Fact finders only need to ask about mandarin oranges in California, or lobstermen in Maine to understand their export pain.
In response to Senator Harris, Vice-President Pence tried to fight back against the trade war allegation with: “Lost the trade war with China? Joe Biden never fought it.” Then, he finished with: “Joe Biden has been a cheerleader for communist China over the last several decades.”
For those who recall the rhetoric of Candidate Trump’s 2016 campaign, and for those who remember the start of the trade accusations in 2017, President Trump’s tariffs originated on a faulty premise. The goal was to foster “America First” and (per Trade Adviser Peter Navarro) convert us from being “Uncle Sucker” to “Uncle Sam.” As time progressed, Adviser Navarro led the trade parade with his “7 deadly sins” of China. American tariffs were going to be effective against cyber-intrusion, currency manipulation, theft of intellectual property, forced technology transfers, unfair competition from SOE’s (State Owned Enterprises), product dumping, and fentanyl. President Trump directed the dialogue about America’s large trade imbalance (deficit) with China. Tariffs were going to fix all this – but what really happened? What was the net result? Was Senator Harris correct about the Trump Administration losing the trade war?
Even before America encountered COVID-19, statistical data related to the trade war was not heading in a winning direction. The key metric for President Trump was the China trade deficit (which actually increased and then slightly decreased – but in a rather strange way).
A trade deficit can be adjusted by raising the exports and lowering the imports. However, if you lower both the imports and the exports, you haven’t solved the problem. A deficit is measured as the difference between exports and imports. The goal was to export more to China and import less. However, that being said, during each and every year of the Trump Administration, exports to China have declined.
For importers, especially in the fashion industry, the cost of product has gone up – simply because of the tariffs that were placed on imported fashion items from China – which is the largest source of supply to the American market. Retailers, brands, and consumers footed the tariff bill, and the Administration actually took some of the money they collected (claiming it was from China) and gave it to the farmers to cover their financial loss of exports. This unfortunate chain of events demonstrated their unique inability to understand the cause and effect of the Administration’s own strategy which seemed to evolve from a concept sometimes labeled as “figgy pudding.”
In August of 2017, there was an Oval Office encounter reported by Axios, to indicate that President Trump turned to Chief of Staff John Kelly and said: “I want tariffs, bring me some tariffs.” To some casual observers of a unique language called Government speak, this sounded a lot like the lyrics from the Christmas song with: “Bring us some figgy pudding and bring it out here.” Soon after the exchange, tariffs were dubbed by some to be a “figgy pudding strategy” for President Trump – which essentially meant: bring me some tariffs, and bring them right now!
The truth behind tariffs is that trade wars just don’t work. They didn’t work in 1930 when the Smoot-Hawley legislation was enacted (which many say ignited the great depression). They didn’t work in 2002 when President Bush issued a tariff on steel, and they didn’t work in 2009 when President Obama decided to place a tariff on low cost tires from China.
Senator Harris was correct about China when she said to Vice President Pence that: “You lost that trade war.”
Here is additional data to support that assumption:
The Phase One China Trade Deal isn’t working. With just a few months left in the year, purchases are only roughly at 50%
The China Phase Two Trade Deal has been cancelled
The Overall U.S. Trade deficit is the highest it has been in 14 years
U.S. retail bankruptcies are at the highest they have been in 10 years. Retail has seen 17 major bankruptcies last year and has 27 majors so far this year. Hard to imagine several of the famous brand names that have appeared on the list – like: Neiman Marcus, J.C. Penney, J.Crew, Lord & Taylor, Ann Taylor, and Brooks Brothers
There are 12.6 million unemployed Americans. Manufacturing jobs did (in fact) grow under the Trump Administration by about 483,000 (per the Federal Reserve Bank of St. Louis) but post COVOD-19, the new numbers now show a net loss of -164,000 manufacturing jobs
Retailers have 483,000 less jobs in the sector than existed in February 2020 (per the U.S. Bureau of Labor Statistics)
America’s Real Gross Domestic Product was down -31.7% in the second quarter
America’s Consumer Confidence Index was down to 102 in September (as compared to 125 a year ago)
The U.S. Debt will exceed the size of the U.S. economy by next year. The last time the debt-to-GDP ratio was this high was in 1946 (when we were recovering from spending that occurred during World War ll). Note that during the 2016 Presidential campaign, Candidate Trump said he would eliminate that national debt in 8 years. When he took over the office – the debt was at $20.2 trillion and it’s now at $27+ trillion.
When Senator Harris stated: “You lost that trade war. You lost it” – based on the factual status of our national economy, her comment could even be viewed as somewhat low key.
When Vice President Pence responded with: “Lost the trade war with China? Joe Biden never fought it” – that response is a faulty counter argument, since it’s hard to blame an Administration for losing a trade war they never fought. Plus, the Obama Team’s economic weapon was going to be the Trans-Pacific Partnership, and the Trump Team nixed that on their first day in office.
On a more positive note, one can easily give credit to President Trump for working to correct many of the trade issues with China. However, looking back at the “7 deadly sins,” it would appear that after four years in office, America hurt its own economy more than it has inflicted any lasting corrective action on China trade.
And finally, with regard to the famous debate fly that landed on the Vice President’s head, one thought is that the fly was delivering a social media message about managing international trade. Perhaps it was reflective of a quote from William Golding’s book, Lord of the Flies:
“We did everything adults would do. What went wrong?”