Desmond Lachman looks ahead to likely economic policies during a second Trump administration.
Dennis Robertson, the late Cambridge economist, said that fashion in economic ideas was like going to the greyhound races. If you stood still long enough, the dogs would come around one more time.
Judging by the keynote addresses at this week’s Republican Convention, it seems that two very bad economic ideas have come back into fashion. The first is that globalization is inimical to domestic economic prosperity. The second is that concerns about the country’s high public debt level are misplaced and that those concerns should not come in the way of additional tax cuts. This suggests that if Donald Trump does get elected for a second term, we should brace ourselves for some rough economic sledding.
Anyone doubting that under another Trump presidency globalization will be trashed has not been paying attention to Trump’s specific trade policy proposals. He has indicated that, if elected, he will impose a 60 percent tariff on all Chinese imports. At the same time, he will impose a ten percent across-the-board tariff on imports from all other countries. Judging by the manner in which he imposed tariffs during his presidency, Trump must be assumed to be planning to hike tariffs unilaterally without bothering to justify his actions to the World Trade Organization or to negotiate with our trade partners.
One obvious disadvantage of aggressive import tariff increases is that they will add to inflation by increasing the cost of imports. Another is that a large part of the burden of those tariffs will fall unduly on those in society least able to bear them. Worse yet, those tariffs are all too likely to take us back to the economically disastrous beggar-my-neighbor policies of the 1930s.
Especially in today’s world of increasingly nationalistic governments, it would be fanciful to think that large increases in US import tariffs will not be met by other countries retaliating with import tariffs of their own.
