Trump鈥檚 protectionism raises unemployment
UNIGE researchers demonstrate that far from protecting Americans from international competition, the protectionism put in place by President Donald Trump increases unemployment.
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The protectionist policy of US President Donald Trump is criticized on all sides around the world, but seems to suit the Americans, who see this economic model as protecting their interests. Could they be wrong? A study by researchers of the AV短视频 (UNIGE) quantifies the effects of Donald Trump鈥檚 protectionist policies on unemployment and welfare in Organisation for Economic Co-operation and Development (OECD) countries. Their results, published in the Journal of the European Economic Association, show that such policies would have a negative impact on welfare and employment in both Mexico and the United States.
While the U.S. administration has been openly implementing protectionist trade policies ever since Donald Trump became president, economists are striving to analyze the effects of such a stark policy reversal. Yet, almost no trade models that economists use to quantify the effects of such trade policy changes include unemployment as an important margin of adjustment. 鈥淭he unemployment rate is nevertheless an important indicator of a country鈥檚 economic health鈥�, notes C茅line Carr猫re, a professor at the Geneva School of Economics and Management (GSEM) of the UNIGE. 鈥淭hat is why we have been particularly interested in the evolution of unemployment figures in OECD countries.鈥�
Reduced welfare through protectionism
The study shows that repealing the North American Free Trade Agreement (NAFTA) 鈥� an announcement made by President Trump shortly after taking office 鈥� and the imposition of 20% bilateral tariffs between the US and Mexico in all sectors would reduce average welfare by 0.31% in the US and by 6.6% in Mexico. 鈥淔urthermore, this policy would increase unemployment by 2.4% in the United States and 48% in Mexico!鈥�, emphasizes Fr茅d茅ric Robert-Nicoud, professor at the GSEM and co-author of this study.
In their study, UNIGE researchers reveal in a second scenario the impact of Trump鈥檚 economic policy on the automotive industry. 鈥淎 US increase of trade barriers on motor vehicles against imports from all countries bar Mexico and Canada would lead to a decrease in long-run welfare and employment in both Mexico and the US as well as in major car-producing countries鈥�, warns Anja Grujovic, researcher at the Center for Monetary and Financial Studies (CEMFI) in Madrid, Spain.
The GSEM study thus shows that far from favoring his country鈥檚 industrial players, Donald Trump鈥檚 protectionist policy has a negative impact on them in the long term. Moreover, it not only affects Americans, but also neighboring OECD countries, such as Mexico. 鈥淚n this way, we show that protectionism often hides negative aspects that only emerge over time, sometimes after the end of a president鈥檚 term of office, who can then be satisfied with the results obtained when he was in power鈥�, Fr茅d茅ric Robert-Nicoud concludes.