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The Link Between the Shift in Politics and Globalization (VIDEO)

By and ·May 30, 2019
Harvard University and The Fletcher School, Tufts University

The Issue:

The 2016 election was unique in that — for the first time in 75 years — candidates from both political parties, Donald Trump and Senator Bernie Sanders, ran for their party's nomination on platforms that were explicitly hostile to international trade and investment. Why did this happen? In this video, Jeffry Frieden, Professor of Government at Harvard, discusses his research on county-level voting patterns in the 2016 U.S. elections.

What this Means:

Many of the counties that saw the biggest swing in voting patterns between the 2008-2012 elections and 2016 were counties in the industrial belt that have suffered decades of decline due to technological change and trends in international trade and investment. In this context, broad international economic trends have an on-the-ground impact on local society and local politics and, eventually, on national politics.

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The Relevance of the Global Economy to the U.S. (VIDEO)

By and ·May 19, 2019
The Fletcher School, Tufts University and The University of California, Berkeley

The Issue:

Because of increasing reliance on international trade, the special role of the U.S. dollar as an international currency, and the vast flows of borrowing and lending in the global financial market, what happens abroad impacts the United States.

What this Means:

It is important to understand that U.S. economic policy impacts foreign markets as well and that those effects are likely to spill back to the U.S.

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The Costs of Tariffs in the U.S.-China Trade War

By ·May 14, 2019
University of California, Davis

The Issue:

The tariff war imposes costs on U.S. consumers, firms, and farms. But determining who bears the bulk of these costs can be complicated. Economists have begun to analyze the initial impact of the first sets of tariffs — giving a first glimpse of how these taxes on imports are being absorbed across the U.S. economy. These studies also provide a way of thinking about how the costs of further escalation might be distributed.

The Facts:

  • U.S. consumers and the firms that make, trade, use, and sell the goods subject to tariffs can all pay a portion of the cost of the tariffs. Determining who pays how much is an empirical question.
  • Recent research shows that the new tariffs are completely passed through into increased prices paid by U.S. importers as the targeted goods cross the border. These studies indicate that the tariffs are increasing costs of production for U.S. firms and reducing purchases of targeted goods; therefore, the results strongly suggest that the tariffs are disrupting supply chains for U.S. firms.
  • The additional costs that households may bear as a result of increasing tariffs will vary greatly from one household to another and depend on their particular purchases. It is difficult to estimate the average costs across households with precision, but different studies give a range of possible values. Drawing from these studies, the cost per year to the average U.S. household of tariffs on all Chinese goods could be between $300 and $800 a year — a large bite out of the tax cut received under the 2017 Tax Reform Act.
  • Because production can increase in domestic firms whose products are protected from foreign competition by tariffs, estimating the jobs impact of tariffs has to take into account jobs gained, as well as those that are lost due to retaliation. The U.S. Department of Commerce International Trade Administration estimates that just under 1 million U.S. jobs were supported by U.S. exports to China in 2015. Many of these could be put at risk due to retaliatory tariffs. Research shows retaliatory tariffs have eroded real wages in the most exposed local labor markets.

What this Means:

Several studies show that the cost of recent tariffs on Chinese exports is fully passed on into prices paid by the importer of record at the border. They also strongly suggest that these increases in tariff-inclusive prices at the border increase prices for firms and consumers, not just the intermediaries and upstream firms. Further escalation of the trade war is likely to raise the costs.

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Immigrant Earnings and Out-Migration from the United States

By ·May 8, 2019
University of California, Los Angeles

The Issue:

Immigration is not a one-way flow into the United States: There is significant turnover, with many of the foreign-born who work in the United States leaving the country after some time. Studying the characteristics of immigrant workers who leave the country and those who stay can give us a better understanding of how work trajectories might impact immigrant selection and assimilation.

The Facts:

  • Immigrants currently make up about one out of every six workers in the U.S. civilian labor force. These foreign-born workers include people in different categories of immigration status — which can be temporary or permanent.
  • In recent research we follow immigrant workers between the ages of 25-45 from the year they arrive to the United States for up to a decade, to better understand how those who stay differ from those who leave.
  • Almost 40 percent of the documented immigrants who arrived in the U.S. in our sample had left within the decade.
  • There is a divergence in average earnings between immigrants who stay long-term and those who leave within the ten-year window we observe (see chart). There is a relatively quick “catch-up” phase with the earnings of native-born Americans that occurs in the first few years after arrival for those that end up remaining in the U.S. In contrast, the average earnings of those immigrants who subsequently leave the U.S. only reaches 80 percent of the earnings of similar native-born Americans.
  • A decline in earnings for several consecutive years is a strong predictor of return migration for an immigrant. This suggests that poor labor market experiences as manifested in a downward earnings trajectory contributed to the decision to leave the United States, either to return to the home country or to emigrate to another country.

What this Means:

A large proportion of documented immigrant workers who entered the United States in 2005-2007 left within a decade. Those most likely to leave had consistently lower earnings than Americans with similar levels of education and tended to have a decline in earnings in the years before they left. This seems to indicate that, in addition to the requirements set out by different visa categories, the experience with U.S. employment also helps to shape the characteristics of the immigrant population that winds up staying in the United States.

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China’s Exchange Rate Policy (VIDEO)

By and ·May 6, 2019
The Fletcher School, Tufts University and The Brookings Institution

The Issue:

China has been moving from an exchange rate regime in which the yuan was pegged to the U.S. dollar to one in which the relationship between the two currencies is somewhat looser. But the path to this transformation has been bumpy. The difficulties illustrate the challenges China faces in the process for determining the value for its currency.

What this Means:

A relatively stable and predictable exchange rate between the yuan and the dollar facilitates trade and investment decisions for businesses in China and the United States. But staying too close to the dollar can be a problem for China with respect to its other major trading partners in East Asia, Europe and elsewhere.

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