Biden administration National Security Advisor Jake Sullivan recently made several assertions about the U.S. economy in general and trade policy specifically. He got basic facts wrong in many instances, which may help explain the Biden administration’s bungled trade policy. By starting with incorrect (garbage) assumptions, the Biden administration has wound up with garbage trade policies.
Assertion: “Today, in 2023, our trade-weighted average tariff rate is 2.4 percent—which is low historically.”
Fact: Under President Biden, tariff rates have risen to their highest level since 1994.
Assertion: “Here, the prevailing assumption was that trade-enabled growth would be inclusive growth—that the gains of trade would end up getting broadly shared within nations. But the fact is that those gains failed to reach a lot of working people. The American middle class lost ground.”
Fact: According to the Congressional Budget Office, real income for the median U.S. household increased by $11,400 from 1994 to 2017 as the average U.S. tariff rate was cut in half. According to the Census Bureau, real median family income increased by $13,813.
Figure 2: Household Income and U.S. Tariffs
Assertion: “And the postulate that deep trade liberalization would help America export goods, not jobs and capacity, was a promise made but not kept.”
Facts: From 1994 to 2017…
- U.S. real goods exports increased by more than $1 trillion.
- The United States added more than 32 million new jobs.
- Real U.S. manufacturing output increased by 20 percent.
Mr. Sullivan concluded his remarks with a quote from John F. Kennedy. We will conclude by sharing JFK’s remarks upon signing the 1962 Trade Expansion Act.
“This act recognizes, fully and completely, that we cannot protect our economy by stagnating behind tariff walls, but that the best protection possible is a mutual lowering of tariff barriers among friendly nations so that all may benefit from a free flow of goods.”
That goal should be the starting point for the Biden administration’s trade policy going forward.