President Donald Trump claims he will use international trade policy to bolster the middle class and reduce income inequality.
“The great American middle class is disappearing,” he wrote for USA Today during his campaign. “One of the factors driving this economic devastation is America’s disastrous trade policies.”
That rhetoric resonated with many of the disaffected and downwardly mobile workers who had voted for Democrats in past elections. It seemed to echo labor’s longstanding criticisms of so-called free-trade deals.
But while Trump’s proposals for high tariffs might sound good, he plans to combine them with policies that further weaken unions. That means his trade policy reforms will end up increasing corporate profits without improving wages for US workers.
Been Here Before
Trump’s combination of trade protectionism and antiunion policies has a clear historical precedent. The US government pursued the same policy mix during the late 19th century.
That was a period when high tariffs on imports and the repression of labor led to the rise of wealthy industrialists, extreme income inequality, and a Gilded Age that left most workers behind.
How do high tariffs affect wages? It depends on conditions in the labor market.
Tariffs encourage companies to produce more goods at home — but increased production does not always lead to higher wages. When unemployment is high, as it is today, it’s easy for companies to hire more workers without raising pay.
The best way to ensure profit-sharing in such sluggish labor markets is to empower unions to bargain. A closer look at American history demonstrates that workers only shared in the benefits of trade policy reforms when they were able to organize powerful unions.
Linking Wages to Profits
During the 1880s, the US steel industry gave rise to the strongest industrial union in the world — the Amalgamated Association of Iron and Steel Workers (AA).
This powerful union compelled employers to sign contracts that explicitly linked…