The Next Export Industry That Trump Could Kneecap

Higher education.

Penn Campus
For universities including the University of Pennsylvania, above, international students represent a growing market willing to pay a substantial premium for their product.

Bryan Y.W. Shin/Wikimedia CC

President Trump is obsessed with the trade deficit. It’s the yardstick he uses to compare the size of our economic manhood to those of other countries. If a sector has a trade deficit, it’s losing. If it has a trade surplus, it’s winning.

The reality, however, is that we’re not doing nearly as bad at trade as Trump and many others think. The U.S. doesn’t make goods and services the world wants—except the $190 billion of stuff we export every month. People around the world are actually quite interested in buying what we make. The trade deficit as a percentage of GDP is actually quite low.

And so you’d think a coherent policy might double down or encourage those sectors that are helping to produce a trade surplus, or at least not to harm them. Unfortunately, the Venn diagram of “Trump policy” and “coherent policy” involves virtually no overlap. We’ve already seen this with regard to tourism, a massive export industry in which the U.S. sports a huge trade surplus. Trumpian policy pronouncements and the general hostility to foreigners that the president has inspired may be tamping down foreign travel to the U.S., harming a whole host of professions in the process.

Now it looks like the same set of attitudes—the idea that foreigners aren’t quite as welcome on these shores as they once were—may be about to impact another big, important U.S. industry that is an effective exporter and a contributor to economic growth: higher education.

When foreigners come to the University of Texas to study biology or get a medical degree at the University of Miami or seek a Ph.D. in economics at the University of Chicago, the tuition they’re charged is an export. From an economic perspective, there’s a lot to like about foreign students coming to the U.S. They tend to pay more tuition and get less financial aid from U.S. sources than American students. Often, their tuition is supported by their own governments. When they arrive here, they spend money on rent, food, and travel, stimulating the economy. And of course, they add to the stock of educated skilled workers that companies can hire.

The Institute of International Education has some excellent data on these trends. As with tourism, there’s a large imbalance between foreign students coming to the U.S. and U.S. students going to study abroad. In the 2014–2015 academic year, the most recent year for which data is available, some 313,415 U.S. students went to study abroad. But in the 2015–2016 academic year, 1.044 million foreign students studied in the U.S.—more than three times as many. This has been a huge growth area. In the 2007–2008 academic year, only about 600,000 foreign students came to the U.S. At Donald Trump’s alma mater, the University of Pennsylvania, 4,859 students—about 19 percent of all students—are from other countries.

And that adds up to big money. NAFSA, an international education trade association, estimates that in the 2015–2016 academic year, foreign students accounted for $32.8 billion in economic activity, supporting more than 400,000 jobs. (NAFSA has a tool that breaks down this activity by state and Congressional district.) What’s more, the consistently rising demand from foreign students has been one of the factors that has helped sustain the relentless rise of higher education tuition. For colleges and universities, international students represent a growing market willing to pay a substantial premium for their product. Rather than crowding out American students, foreign students are actually subsidizing them.

Of course, as with tourism, exporting higher education depends on the desire and willingness of students to travel to the U.S. to study, and the desire and willingness of the American immigration and customs bureaucracies to facilitate their travel. And it stands to reason that if the administration expresses a general hostility to foreigners, that if foreigners visiting the U.S. are banned, or singled out for harsh treatment, or deported, or detained for no particular reason, then many of them will begin to think twice about seeking degrees here. There are universities all over the world, after all.

And guess what? It’s happening. In February, Science reported that many engineering schools are seeing significant declines in foreign applicants. Vanderbilt says foreign applications to its engineering master’s programs are off 28 percent from last year. Dartmouth is reporting a 30 percent decline in international students interested in its master’s program in engineering management.

Six trade groups, including the Institute of International Education and NAFSA, surveyed 250 colleges and universities earlier this year to see what was going on with foreign applicants. The findings were mixed: 39 percent said foreign applications were falling, 35 percent said they were rising, while 26 percent said they were the same. Declines were particularly pronounced from students from the Middle East as well as India and China. Among the reasons cited: “Perception that the climate in the U.S. is now less welcoming to individuals from other countries”; “Concerns that benefits and restrictions around visas could change, especially around the ability to travel, re-entry after travel, and employment opportunities”; and “Concerns that the Executive Order travel ban might expand to include additional countries.”

Thanks, Trump!

Of course, there were some signs that the growth in foreign applicants might begin to fall before Trump’s elections, as economic problems in Brazil and Saudi Arabia impacted the ability of some students to afford U.S. tuition. And we’ll know more as universities report numbers in the coming year. But since the global financial crisis, foreign applications have been on a sharp upward trajectory. It would be quite strange to see a reversal in a year in which the global economy is growing.

It’s one of the truisms of the global economy that as more people around the world gain more income, they are more interested in experiencing what America has to offer: as a producer of consumer products and brands like Coca-Cola and McDonald’s, as tourists, and as students. But if we start sending out the message that we don’t want people’s business, they’ll take their money elsewhere.