Donald Trump’s economic policy has often been vague or vacillating, causing deep frowns among economists across the political spectrum. But will he change course as he positions himself for the presidential election?
Trump takes the stage Thursday for a much anticipated speech at the Republican National Convention, two days after accepting the party’s nomination as its presidential candidate. As he turns now to take on Democratic contender Hillary Clinton, economists, businesses and politicians will be listening closely for developments in his economic policy.
Credit rating agency Moody’s calculates that his proposals so far would cost a total of 3.5 million jobs if implemented. The repercussions would set off a “lengthy recession” in the country, it says.
Congress usually sees to it that campaign proposals rarely turn into legislation. But for some economic policy questions including free trade agreements, a big issue for Trump supporters and detractors, the US president enjoys considerable autonomy.
And with the economy looming large on US voter’s minds, Trump’s hopes for the presidency will rest to a large extent on how he adresses financial issues. Here’s a look at what he has proposed so far:
- Trump has repeatedly called for increased protectionism. He has lambasted the North America Free Trade Agreement for “destroying” American jobs, as well as the Trans-Pacific Trade Agreement as “a terrible deal” for the country. He says he would repeal them both. Likewise, he could be expected to call a halt to floundering negotiations for the TTIP trade agreement between the US and the EU.
Instead of tearing down trade barriers, Trump largely hopes to build them back up. In this regard, he gives China the most aggressive attention, calling for protective tariffs against its products.
But German businesses are inevitably also concerned. In addition to the general influence of the world’s largest economy on the well-being of its own, the US is the biggest buyer of “Made in Germany” products. It imported $125bn (€114bn) worth of goods from Germany in 2015. Many voices in German industry fear a Trump victory in November’s election would spark the year’s second major economic shock here after Brexit.
Larry Summers, former treasury secretary to President Bill Clinton and former director of the National Economic Council under President Obama, warned: “If Mr. Trump did even half of what he has promised, he would surely set off the worst trade war since the Great Depression.”
Debt and Taxes
Stances on taxes have normally been one of the defining distinctions between candidates in US presidential races. Again Trump has not yet articulated a clear policy here either. He originally announced his intention to cut taxes for all Americans in a proposal he unveiled last September. The wealthiest stood to benefit the most from his plan, which aimed to chop the top rate from 40 percent to 25 percent.
Trump later backtracked on this proposal and expressed openness to raising taxes on the rich. This represents a break from decades of dogmatic Republican opposition to tax hikes in any form. He nonetheless stood by his intention to lower taxes for the middle class and for business.
He has also expressed support for raising the minimum wage in the US, a hot topic amid growing calls, particularly from the left, to more than double the country-wide minimum rate from $7.25 to $15. But he added that he would rather “let the states decide” on the matter, than have the federal government lead the push.
And he has mused about renegotiating with lenders to restructure the country’s large debt load if the economy turns sour, a possibility that would affect the government’s creditworthiness. He backtracked on this idea as well, after encountering considerable blowback, much of it from rival presidential candidate Hillary Clinton.
Most worrying in many respects have been Trump’s calls to build a wall along the US-Mexico border and deport the more than 11 million illegal immigrants living inside the US. Such measures, particularly the latter, would have dramatic and wide-reaching consequences for the economy, not to speak of the social cost.
To do so would deprive the US of a vast legion of tax payers, consumers and workers. Up to seven million undocumented immigrants are thought to be part of the country’s workforce. They take jobs the rest of the population wouldn’t likely fill in their absence and contribute to government funds by paying sales and property tax, as well as in some cases income tax.
Many economists expect a contraction in the US economy if his immigration proposals were to come to fruition.
Finally, Trump has sought to promote traditional non-renewable energy sources. He has surrounded himself with climate change skeptics and is reported to be considering Oklahoma oil mogul Harold Hamm as his energy secretary. Hamm amassed considerable wealth over the past decade by utilizing the controversial fracking method of oil extraction.
Given the general resistance to his ideas, it’s an open question as to whether he will stick to the winding path he followed during the Republican primary season. Candidates tend to shift their message towards the center as they move from the primaries to the actual election – and then once more if they make it to the White House.
But his political ascendance has been undoubtedly a result of his populist appeal – and economic elites cannot simply expect him to turn against a message that has so far proven so successful for his campaign.
Whether it is likely or not, the mere chance of a Trump presidency, if he sticks to these proposals, are likely to only add to the uncertainty wracking the US and global economies alike.