First, while Trump’s enthusiastic embrace of protectionism — “trade wars are good, and easy to win” — is a break with generations of U.S. policy, his domestic economic agenda has been pure, orthodox Republican voodoo. That is, it was all based on the belief that cutting taxes on rich people and corporations would have a magical effect on the economy.
But the magic failed, as it always does. The Trump administration repeatedly promised that the 2017 tax cut would produce a huge boom, with long-term growth above 3 percent; nothing like that is happening.
And to the extent that we are seeing growth, it’s being driven by consumer spending. Business investment, which the tax cut was supposed to promote — and which is a key source of demand for U.S. manufacturers — is actually falling.
What’s holding back investment? Many analysts blame Trump’s trade war. His tariffs have the direct effect of disrupting global supply chains on which U.S. producers have come to depend. What’s probably even more important, however, is the uncertainty created by Trump’s erratic actions, which gives both businesses that depend on imports and businesses that compete with imports a strong incentive to put any plans they might have for expansion on hold.
I’d add that Trump’s trade war isn’t the only source of destructive uncertainty. He’s a promoter of crony capitalism across the board, constantly threatening to punish businesses he sees as political enemies while rewarding businesses that do him political or personal favors. So even businesses that aren’t much affected by his trade actions have to wonder whether they’re going to get Christmas presents or a lump of coal, which has to discourage them from making investments that might be devalued by a presidential tweet.
Finally, in many cases Trump’s tariffs on China haven’t benefited U.S. producers; instead, they’ve just shifted the source of imports to other countries, like Vietnam.
Could Trump have been more successful at boosting manufacturing? Well, things might look very different if he had actually followed through on his campaign promises to make big investments in infrastructure, which would have created a lot of sales for U.S. manufacturing.
As it is, however, Trump is presiding over an economy that, despite low unemployment, doesn’t feel like a boom to most Americans. And he has utterly failed in his politically crucial promise to make manufacturing in key swing states great again.
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