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Can Donald Trump manage his economic balancing act?

Donald Trump addresses the Economic Club of New York on Thursday. Credit: Getty

September 7, 2024 - 4:00pm

Speaking at the Economic Club of New York on Thursday, Donald Trump sketched the outline of a new policy fusion, bringing together elements of traditional Republican economics and populist priorities. A titanic clash between “Reaganism” and “Trumpism” is catnip for American pundits, but Trump builds on longstanding Republican economic themes.

The goal of this new populist fusion is capacity. Like his Republican predecessors, Trump has pledged to expand energy production at home. This would at once bring down bills for American families and make it easier to build back the US industrial base, which Trump has set as a key priority. The former president’s emphasis on deregulation is another note in harmony with Reaganite policymaking; as with energy production, this is pitched as a way of expanding economic growth.

Trump is also attempting to build bridges with the tech sector. In addition to saying he would appoint ally Elon Musk to lead a commission on Government efficiency, Trump has specifically highlighted how he would promote cryptocurrencies and make the United States a world leader in AI. This is a fusion of Silicon Valley and the Rust Belt — aiming to strengthen the industrial base while taking the lead in cutting-edge technologies.

Republicans have long used tax policy as a major lever for economic policy in general, an approach on which Trump puts a distinctive spin. His first term was characterised by standard-issue GOP thinking on taxes; Paul Ryan was, after all, a singular influence on the 2017 tax bill. So far this campaign season, Trump’s tax policies have evolved. He had long pushed for another cut to the corporate tax rate — from 21% to 15% — but his New York speech suggested that he would make this more targeted. He said that only companies that “make their product in America” would enjoy this new, reduced rate, as well as receive other tax incentives for research and development.

How to apply that selective rate would be unclear, but tax incentives for domestic manufacturing would dovetail with another policy measure which Trump has talked up: tariffs. With Joe Biden extending many of Trump’s tariffs on the People’s Republic of China, the GOP nominee perhaps feels that his approach to trade has been vindicated. Now, he seems intent on trying to push the tariff agenda even further in a second term.

Besides raising tariffs on China, Trump has also indicated some sympathy for boosting tariffs across the board in order to encourage more domestic manufacturing. Many of the 2017 tax cuts for individuals are set to expire in 2025, and he has pledged further cuts such as exempting Social Security payments from income tax. Tariffs, he claims, could help pay for these other efforts.

As president, Trump would have considerable manoeuvring room to roll back administrative regulations and incentivise the production of more energy. Because Congress gives the president great latitude in setting trade policy, Trump also used executive action to raise tariffs on Beijing in the past. Both his critics and his allies think he might use the International Emergency Economic Powers Act to raise tariffs more broadly. That exercise of power might invite a legal battle, so a clearer way forward would be through Congress — whose legislation would also be required to make some of these other tax proposals a reality.

How this agenda would fare in Congress in part depends upon down-ballot election results, and there remain tensions within the GOP coalition on many of these issues. Targeted efforts to restrict trade with China or rebuild American defence manufacturing likely have more of a consensus than an across-the-board tariff agenda, which would be disruptive for many businesses. While Trump has long been indifferent to deficit spending, the explosion of the national debt since 2020 increasingly worries policymakers. Even some populist voices — including the New Right think tank American Compass — have argued that Republicans need to take decisive action to confront deficits. Those fiscal pressures could shape the ultimate trajectory of Trump’s economic agenda in a second term.


Fred Bauer is a writer from New England.

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Hugh Bryant
Hugh Bryant
1 month ago

Cheap energy, tax breaks for industrial investment, de-regulation, no limits on AI capacity …

A Trump Presidency will suck every spare penny of risk capital out of Europe unless the Eurocrats and New New Labour change direction, which doesn’t seem likely.

Jo Jo
Jo Jo
1 month ago
Reply to  Hugh Bryant

Wish I could name a UK politician with half the ideas, half the energy.

Brett H
Brett H
1 month ago
Reply to  Jo Jo

Actual ideas in policy are rare anywhere in the world today.

j watson
j watson
1 month ago

As we know there is a big gap between what Trump says and what he does. Some of that is just he’ll say whatever he thinks necessary to get re-elected. Some is he’s then incapable of focusing sufficiently, navigating the inevitable Congressional complexity etc to get much done that sticks. He’ll be a lame duck quickly in any 2nd term too so I wouldn’t be holding one’s breath on many of these promises. He also won’t need to be re-elected again and Trump driven by self-interest. Now if the Republicans had gone with someone else…
As an aside if he did accelerate drive on ‘US First’ policy then UK’s Brexit lunacy just looks ever more isolating and self harming. But perhaps something to match in greater incentives to invest at home would b a useful counter reaction – trillions in pension funds and UK has halved what these invest in equities last 20yrs thus starving our companies of investment capital and driving them elsewhere. The rules can be changed. Will take time and perhaps we need more financial literacy campaign too – folks want to keep retiring when they do low risk investments aren’t going to cut it whilst also crippling the UK economy

Hugh Bryant
Hugh Bryant
1 month ago
Reply to  j watson

This all comes across a bit desperate JW. The most important factor in economic success by a very large margin is energy costs. The US is now the world’s largest energy producer. That makes it very easy for Trump to suck capital out of Europe. All he has to do is wave through the licences that Biden blocked and create a cheap energy bonanza. AI, which is being hamstrung in Europe, will do the rest.

So Europe will face massive capital flight at the same time as its own energy costs skyrocket, thanks to all the regulation that’s currently in the works, and fall further behind – as it has for twenty years now.

All of which means your bleating about Brexit makes less sense than ever. A British government that actually cared about the welfare of its people (not Starmer’s, obviously) would be focusing its diplomacy on Washington, not Brussels.

Perhaps skip the economics in future, eh? Not your strong suit.

Andrew Fisher
Andrew Fisher
1 month ago
Reply to  j watson

What’s Brexit actually got to do with this? Do you consider perhaps that “Europe” is going to go for an energy bonanza? For example encouraging more oil and gas development in the North Sea, shale gas production etc? What particular recent policy statements lead you to that conclusion?

Oh no, instead we’re going to have more Chinese made wind turbines and solar panels! The sun doesn’t always shine and wind doesn’t always blow – often at the same time! And energy storage simply isn’t there at the moment – it’s a miniscule fraction of what will be required to make anything like a solar and wind powered economy function. And we’re not going nuclear either!

Liam F
Liam F
1 month ago
Reply to  Andrew Fisher

…and we have that half-wit Wallace Milliband in charge of energy strategy…

laurence scaduto
laurence scaduto
1 month ago

How refreshing. An essay about Trump sans the fear and loathing.
And the policy proposals seem to be well aimed.
Fire away!

Michael Clarke
Michael Clarke
1 month ago

Trump had a winning economic policy. All he had to do was spell it out but he wasted valuable weeks during which of course he was lucky to survive an assassination attempt. JD Vance should have taken over at that point (to give Trump a break) but he has become anonymous. It’s far too late now for the GOP.