Former US President and current candidate for the presidential elections, Donald Trump, promises to impose large-scale customs duties aimed at promoting local manufacturing and confronting China, in addition to reducing taxes on individuals and companies, if he immediately takes the presidential seat.
But Trump’s critics warn that these policies could harm the US economy and increase international tensions, as well as lead to higher prices and harm low-income families.
Writers Colby Smith, Claire Jones, and James Politi mentioned in their report published by the Financial Times that Trump pledged at an election rally in Tucson, Arizona, earlier this month to end the “chaos and misery” that Americans were suffering under the administration of current President Joe Biden, and promised By reducing taxes, energy costs, interest rates and inflation.
Trump has continued to criticize the Biden administration and his deputy, Kamala Harris, due to the country’s high cost of living crisis since he launched his election campaign for a second presidential term.
Republican treatment
The former president is offering the traditional Republican remedy of new tax cuts on the campaign trail, but this time he has developed a more populist economic policy agenda designed to portray him as a defender of the interests of ordinary workers and domestic manufacturing.
The writers reported that the main axes of what Trump calls “Maganomics” include imposing stricter tariffs on imports from around the world, especially from China, and a strict crackdown on immigration, and the campaign’s rhetoric also pushes towards greater political influence on monetary policy and the dollar.
“Maganomics” is a modern term with political and economic connotations. It is a combination of “make America great again” (maga), the campaign slogan of former President Donald Trump, and “economics”.
Although it is difficult to distinguish between what is a “plan,” what is a “threat,” and what is a “negotiating ploy” in Trump’s electoral rhetoric, economists of all stripes agree that Trump’s agenda represents a more traditional extension of the policies that were introduced during his first term in 2017. And 2021.
However, if he wins the election and actually implements these plans, it will radically reshape the US economy and its relationship with the rest of the world.
The authors noted that critics warn that these policies will greatly harm the economy and will not help the United States compete with China.
According to Jason Furman, a former economist in the administration of former President Barack Obama, and now a professor at Harvard University, if Trump does half of what he promised, the results for the American economy will be chaotic, and he stressed that imposing tariffs on all countries would… It tears apart the bloc of countries that the United States relies on to confront China.
Democrats, drawn by criticism over their record on inflation, were quick to claim that Trump’s proposed policies would lead to additional price increases and harm the economy.
“16 Nobel laureates have described his economic plan as one that will increase inflation and, by the middle of next year, lead to an economic recession,” Harris said in the debate.
Some Trump supporters are concerned about the international implications of America adopting such a strong protectionist approach.
Need to trade
“You need trade, especially with your enemies,” says Arthur Laffer, an economist close to Trump. “I’m not saying we sell nuclear weapons to Kim Jong Un, but you need to have trade so that people talk to each other, like each other, and buy each other.” From them, and they buy from you.”
He stressed that sanctions and threats of customs tariffs are not the right way, but rather a path towards World War III.
The authors stated that Maganomics relies, at its core, on ideas that would turn upside down many aspects of the economic model adopted in industrial economies over the past century. If implemented, it would represent a return to an era in which a large portion of government revenues came from trade tariffs, rather than taxes on people’s incomes and corporate profits.
Ernie Tedeschi, director of economics at the Yale Budget Laboratory and a former official on Biden’s Council of Economic Advisers, believes: “It’s clear that he (referring to Trump) is thinking about radically changing the kind of balance of revenue sources in the American tax system and, therefore, changing the way we think about trade in the United States and our relationship with our trading partners. That’s how we did things in the 19th century,” he said. “Not in the 20th century, let alone the 21st century.”
During his time in the White House, Trump aggressively imposed tariffs on China, many of which were maintained under Biden.
But ideas now being considered suggest that a second Trump term could see the imposition of high levels of import tariffs not seen until the 1930s after the passage of the landmark Smoot-Hawley protectionist tariff law.
After Trump initially said that he wanted to impose tariffs of 10% on all imported goods, he recently said that it might reach 20%. As for Chinese imports, he talked about imposing a tariff of 60%, and he said this month that the countries that plan To reduce its dependence on the dollar, it will be imposed 100% customs duties as punishment.
Manufacturing recovery
Trump’s hopes are not only limited to increasing revenues, but also extend to restoring American manufacturing. Treasury Secretary Janet Yellen estimated this year that two million jobs have been lost in the American manufacturing sector since China joined the World Trade Organization in 2001.
“When they come and steal our jobs, steal our wealth, they steal our country,” Trump told Time magazine last April. “I call it a cordon around the country.”
The authors stressed that this policy has high costs, as calculations by the Peterson Institute for International Economics in Washington indicate that imposing comprehensive customs duties of 20% along with a 60% tariff on China will lead to an increase of up to $2,600 annually in what the average family spends on goods. , and says the tariffs would disproportionately affect low-income families that Trump claims his economic policies help protect.
Tariffs may also hinder growth, according to some economists. “The last time we were in a trade war under Trump, the global manufacturing cycle went into recession,” says Julia Coronado, a former economist at the Federal Reserve.
Mary Lovely, one of the authors of the Peterson Institute for International Economics study, says there is a danger that trade barriers will become an easy-to-use tool, adding that tariffs do not appear in the government budget, although they represent a support for domestic producers, and at the same time they are a tax on consumers, but many voters do not view tariffs as a tax.”
But despite these potential costs, many voters support tariffs, especially in manufacturing-intensive swing states like Michigan.
“I don’t know why we don’t put tariffs on everything that comes from China, and everything from Mexico, too,” says Nelson Westrick, a Ford worker who lives in Macomb County near Detroit.
The authors report that Trump’s advisers claim that tariffs will provide the money needed to support one of the cornerstones of Republican economic policymaking — tax cuts.
Specifically, the second Trump administration plans to make permanent the tax cuts introduced during his first term, and Republicans assert that the 2017 tax cuts on income and investment, which are scheduled to expire in 2025, will contribute to boosting economic growth, which will help address the burden of… The growing financial debt of the US government.
Stephen Moore, an economist close to Trump, said, “The most important thing to solve the debt is to accelerate the growth of the economy. There is a lot on Trump’s agenda that would help achieve this. In addition to lowering tax rates, the economy will grow, produce more energy, and improve deals.” Trump also talked about canceling hundreds of billions of dollars in green energy programs, which would save a lot of money.
Moore added: “I can’t point to a single government program that Democrats want to eliminate, and Trump talked about hundreds of programs and budgets that he (would eliminate).”
However, many economists point out that Trump’s campaign numbers do not match reality. “It’s often been said that tax cuts will pay for themselves, but that’s never happened,” explains Maury Obstfeld, a fellow at the Peterson Institute for International Economics.
Economists argue that these cuts could further strain already strained public finances in the United States, the authors said.
“Tax cuts will increase the deficit, and in a full-employment economy, like the one we have now, this will be inflationary,” the authors quoted Mark Zandi, chief economist at Moody’s Analytics, as saying. “We will make no progress in addressing the country’s poor fiscal situation.” “It is a serious concern that is becoming more serious by the day.”
The main criticism of Trump’s agenda, the authors added, is that it is nearly impossible to cover the cost of tax cuts with tariffs.
The book pointed out that a research group from the Penn Wharton budget model estimated that Trump’s plans would raise the US budget deficit by about $5.8 trillion over the next decade. Meanwhile, the conservative Tax Foundation estimated that his new plan to exempt overtime from federal taxes would cost the United States an additional $227 billion in lost revenue over the next 10 years.
However, Obstfeld and Kimberly Klausing, senior fellows at the Peterson Institute for International Economics, estimate that the maximum additional revenue the administration could raise by imposing a 50% tariff on all goods would be $780 billion.
Earlier this month, IBM Vice President and former Trump White House economic adviser Gary Cohn told CBS that he saw no desire in Congress to pass Trump’s tax plans, saying: “I think there is growing opposition.” In both the House of Representatives and the Senate.
Independence of the Federal Reserve
Some investors and economists also fear Trump’s attempts to undermine the independence of the US Federal Reserve.
The book reported that Trump publicly criticized Jerome Powell (Federal Reserve Chairman) repeatedly during his term, as he once asked via Twitter whether the Fed Chairman was a greater “enemy” of America than Chinese leader Xi Jinping.
The Republican candidate continues to criticize Powell, saying last month that the Fed “got a lot wrong.” He added that his business background gives him “better instinct than – in many cases – the people at the Fed or the chair.”
Following the Federal Reserve’s decision this month to reduce interest rates by half a percentage point, Trump expressed that this decision indicates that the US economy is either “very bad” or that the central bank is “playing politics.”
Robert Lighthizer, the US Trade Representative under Trump who remains a close adviser to him, has expressed a desire to weaken the dollar in an attempt to boost sales of US goods abroad – a policy that is likely to be supported by low interest rates.
