Trump built a wall, not with Mexico, but with the rest of the world. This year the trade war became a reality. The main target was China. Since July the US imposed tariffs on $250 billion of Chinese imports, and China retaliated with tariffs of their own. In addition, Trump began fighting with almost everyone of its other trade partners, alienating many of them. Business will undoubtably begin to suffer. US companies paid $1 billion more in tariffs annually on Chinese tech imports in October.
The November jobs report showed the U.S. labor market continues to hum along; the economy added 155,000 jobs and the unemployment rate stayed at 3.7%, the lowest overall unemployment level since 1969.
Wages were in-line with expectations, with average hourly earnings rising 0.3% over last month and 3.1% over the prior year. Wage growth has been closely tracked for signs of inflation pressures in the economy. Wages rose 3.1% over the prior year, in October, the fastest pace of annual wage growth since April 2009 while 250,000 new jobs were created. Except for the headline gyrations of the stock market, there is nothing to suggest the economy is suffering a more sudden downturn.
Not with standing that the fear of immigration is poisoning Western politics. Trump owes his job to it. Brexit would not be happening without it. Strident nationalists wield power in Italy, Hungary, Poland, and Austria, and have gained influence elsewhere. The West risks a backlash of the sort that ended the previous great age of mobility, before 1914. According to Gallup, 700m people- 14% of the world’s adult population- would like to move permanently to another country, usually a rich one. In Sub-Saharan Africa, the figure is 31%.
The rich world clearly could not absorb so many newcomers at once. This is one reason why the politicians who complain loudest are winning elections. However, the economic benefits of allowing a steady flow are potentially gigantic. An unskilled Mexican who moves to the US raises his wages by 150%; a Nigerian by 1000%. Therein lies the problem: the biggest benefits of moving accrue to the migrants themselves, while the power to admit them rests with voters of the rich countries.