Former President Donald Trump recently told Fox News host Maria Bartiromo that if he’s reelected, he will impose tariffs of a staggering 60 percent — or more — on Chinese imports, signaling a plan to escalate the trade war with China that defined his time in office.
The case Trump is making to voters in 2024 is that the US economy was very strong during his term, but was thrown into disarray by the Covid-19 pandemic. If he were to win a second term, he promises much of the same, with tariffs on imports as the centerpiece of his economic policy. Treasury Secretary Janet Yellen last month warned that such a plan would increase the cost of goods for Americans whose budgets have been pummeled by inflation.
Henry Tricks, who writes the Economist’s Schumpeter column on global business, told Vox’s Noel King on a recent episode of Today, Explained that Trump’s plans for a second term are making the business community nervous. The transcript below is adapted from their conversation and has been edited for length and clarity.
If there’s one thing Donald Trump does well, that would be disruption. But you say this time around, Trump isn’t explicitly planning to disrupt things.
[Trump is] hoping to launch economic policies that make the economy grow in a similar way that it grew during his administration from 2016 to 2020. And to be fair to him, the economy did pretty well under his administration.
The danger is that his approach to economic policy actually risks exacerbating the economic problems that Americans are suffering from today. And particularly, we’re talking about high inflation there.
We know of Donald Trump as a kind of “cut taxes and raise tariffs” kind of a guy. This time his main campaign promise is on the tariff front. He calls himself Tariff Man, and he has this plan to increase tariffs across the board in the US.
What Trump wants to do is effectively triple the average rate of tariffs. He also wants to retaliate against countries with particularly high tariffs on American products by raising the American tariffs to the same height. And this could have a pretty detrimental impact on trade. Trade wars are never very good for the economy. They lower economic growth and they tend to hit those on the lowest income hardest, because tariffs raise the price of consumer goods, such as the sort of stuff that you buy in the grocery store.
Why would Donald Trump want to do something over the next four years, if indeed we elected him, that would make things more expensive for American consumers already having problems with inflation?
It’s a question that many, many orthodox economists ask. Trump’s trade advisers are a pretty weird and unorthodox bunch. They see a trade deficit as being a sign of economic weakness, and America has a big trade deficit. So they think that basically, if they can raise tariffs, they can move America from being a net importer of goods to a net exporter.
It’s an argument that has some adherents, but the more orthodox view is that actually the trade deficit is not a result of low tariffs. It’s more a result of America’s low savings rates. And at the moment, Americans are saving little because they’re spending a lot. And it’s that spending that’s actually driving the economy pretty strongly.
The other thing is that Trump seems to think that tariffs are a bit like taxes that generate income. So he’s hoping that [by] increasing taxes on entities he doesn’t like, such as foreigners importing into the US, he can use the revenue from those tariffs to compensate for the lower taxes that are there from his previous administration.
What else in Trump’s plans for a second term might affect the economy?
I’ve been talking to the business community, and one of the things that I found really surprising and interesting talking to them was their concern about the migration question that Trump has been talking about. Business is clearly supportive of the idea that America should have strong borders and that there should be legal immigration, not illegal immigration.
However, Trump has suggested, at least reportedly, that undocumented migrants into the US will be sort of rounded up and potentially put into camps and deported. And the numbers that [are] associated with this are huge, you know, we’re talking about potentially millions of people.
The business community is worried about this, partly for humanitarian reasons, but also from an economic point of view, because there is a labor shortage. There are far more job openings right now than there are unemployed Americans. And the concern is that if you take literally millions of undocumented workers, you’re taking those people who are working in the sort of essential frontline jobs, the people who are picking the vegetables or the people who are working in leisure and retail and that sort of thing. And it’s just going to exacerbate the labor shortage.
So the titans of the business community are telling the Economist this, but we aren’t seeing, more broadly, CEOs coming out and saying Donald Trump could be a threat to the American economy. Or am I missing this?
They’re not saying it publicly. They’re very worried about sticking their heads above the parapet for a variety of reasons, some of which are really good reasons. If you talk to them, they’ll say that this is very early in the presidential race. And these are two elderly men. Donald Trump has not officially clinched the nomination to be the Republican candidate. So business people don’t want to burn their bridges too early by criticizing him or his economic policies openly.
But there are also other reasons why it’s good to keep their cards close to their chest. One of them is that the culture wars have been actually particularly damaging for some businesses, and they look at what’s happened with Bud Light, for example. And they worry that if they come out and openly criticize Donald Trump, they’ll get the same response from the MAGA masses.
And it’s really worth bearing in mind that they’re not particularly supportive of the Biden administration’s economic policies, either. They think that Joe Biden has not been a pro-business president in the way that, say, Barack Obama or Bill Clinton was. They worry about his antitrust policies and some of his industrial policies as well. And so there’s not enough support for Joe Biden for them to come out swinging against Donald Trump.
Now, for all of the worry, you also write in your piece about some business leaders, some leading bankers who are looking at the prospect of a second Trump term and saying, “We think it’ll be fine.” And the only thing I can think is that maybe they’re remembering four years ago when we were all kind of panicked and then it wasn’t great by any stretch of the imagination. The Trump years were chaotic and wild. But the economy didn’t collapse. And even during the first year of Covid, it didn’t collapse.
Why do you think some are willing to say that this is just not that big a deal, guys?
Because they look at the strength of the economy at the moment, especially relative to other countries. And they say it’s really quite remarkable how the American economy has avoided recession despite all the hiccups that it’s faced, from a disputed election, Covid, and higher inflation and tighter monetary policy.
So they’re inclined to be a little bit more complacent that, come what may, the American economy, sort of transcended politics. That’s what some people say.
Others worry that there is a sort of dangerous complacency here. Because what Trump is proposing in terms of higher tariffs, mass deportations, this sort of thing — yes, there’s the chaos that you just alluded to, but more importantly, it risks jeopardizing the system on which American business has thrived for decades.
That’s a system that’s based on the rule of law, the respect of contracts, the fact that the US engages in geopolitics in a way that keeps shipping lanes open through the Navy, that sort of thing. There is a resilience to the global economic structure that’s been built up over decades. And they worry that it’s gossamer thin and could disappear overnight if Mr. Trump were to blow it up.