New document reveals Donald Trump's economic strategy in detail
Donald Trump would pull the United States out of the World Trade Organisation if necessary to help American companies sell more abroad. His believes he can close the United States’ $500 billion trade deficit within two years by renegotiating trade deals. And he sees this new approach to trade as the key complement to a bevy of traditional Republican policies - tax cuts, energy drilling and deregulation adding - that will supercharge thee economy, according to a new campaign analysis that lays out the Republican candidate’s economic strategy in the most detail yet.
It is an ideologically scattered plan for a major-party presidential nominee. It is a tapestry of supply-side conservatism and liberal populism. It promises to free American companies to compete more successfully on the world stage and to force America’s top trading partners into submission.
Perhaps paradoxically, it also claims that those trading partners will be better off for bowing to Trump’s demands.
The plan’s guiding theory is that the US economy is growing slowly because past US presidents in the globalisation era haven’t even tried to level the free-trade playing field in America’s favour.
A new 30-page analysis of Trump’s economic proposals, penned by two of his senior policy advisers and issued Sunday evening by Trump’s campaign, provides the most detailed look yet into how Trump envisions his economic plan boosting growth, wages and wealth - through a series of policies that together defy partisan convention. It demonstrates, in quantifiable terms, that trade policy is as important to Trump’s economic promises as tax cuts.
One of its authors, a University of California-Irvine economist named Peter Navarro, describes the paper, titled “Scoring the Trump Economic Plan: Trade, Regulatory, & Energy Policy Impacts,” as simply “the whole chessboard”.
It is sure to draw fire from business groups and liberals alike - for often different reasons.
The advisers believe Trump’s plan will boost US annual economic growth from an average of 2 per cent, as many forecasters expect, to an average of 3.5 per cent, creating millions of additional jobs in the process.
They also believe that, coupled with spending cuts, the plan will generate additional tax revenues that will make up for all the revenues lost from his tax cuts - between $4.4 and $5.9 trillion, by one analysis - meaning the plan would not add to the deficit. The independent Centre for a Responsible Federal budget disagrees with that assessment, projecting Trump would in total add $5.3 trillion to the budget; its analysis did not account for any higher growth from the plan.
Trump’s advisers project he will spur $1.74 trillion in new revenues over a decade from the economic growth generated by trade policy. (The independent Tax Foundation predicts the added growth from his tax cuts will spur about that much, as well.) Trump advisers also project $580 billion in new tax revenue from reducing federal regulations and $150 billion from increased fossil-fuel exploration.
The plan includes much of a traditional conservative “competitiveness” agenda. Trump would slash corporate tax rates, reduce regulatory burdens and seek to push down energy costs.
Each of those proposals has critics in the economics profession; for example, eliminating a Wall Street regulation might reduce compliance costs and free up more money for investment, but it might also increase the odds of a future economy-crippling financial crisis.
But Trump’s team says it also wants to address what they call the “push” of American jobs, and particularly manufacturing, to foreign countries. Where Trump departs from Bush and traditional free-market conservatives is his focus on what Navarro and his co-author, private equity investor Wilbur Ross, call the “pull” of international trade agreements and unfair trading-partner practices on those companies.
Reducing the “pull” is the most critical piece of the Trump economic agenda. Ross and Navarro contend that Trump could do this in a year or two by renegotiating trade deals and other steps. Those include convincing the World Trade Organisation to change rules that advantages exports from countries that rely heavily on what essentially are national sales taxes, such as Mexico and Germany, at the expense of countries that rely more on income taxes, such as the United States.
At points, the analysis details how such change would come about. It says Trump would impose tariffs if necessary against countries that violate trade norms. It raises the possibility of the United States pulling out of the WTO, the governing body of globalisation, in order to force the WTO to change the taxation rule to America’s advantage.
“Without the US as a member, there would not be much purpose to the WTO,” the analysis says, “but prior occupants in the White House have been unwilling to lead on this issue.”
At other times, the analysis simply states as fact Trump’s ability to force other countries to renegotiate existing trade agreements with the United States: “South Korea will have no grounds to complain when Trump calls for a renegotiation. The two parties will simply seek a far more equitable deal.”
In an interview, Navarro cast those re-negotiations as an essential piece of the competitiveness puzzle for US corporations. He said key trading partners, including Germany, Mexico and Japan, will respond quickly to Trump’s toughness as a negotiator and his seriousness on the issue.
“They depend on us more than we depend on them,” Navarro said, of the trading partners. “They’re the ones running the surpluses. They have a lot more to lose than we do.”
Later, he predicted the Chinese would end a series of “cheating” practices on trade: “Donald Trump comes into the White House, they will perceive strength, and they will understand that it’s in their best interest to make a better deal and move forward with relations.”
Many trade officials from the Bush and Obama administrations would dispute that point, as would many economists. In the analysis and the interview, Navarro downplayed the possibility that Trump’s trade efforts might backfire, producing an escalating set of tariffs between countries that slow global trade, and growth, dramatically.
Several analysts have warned of that possibility, and millions of potential lost jobs, in models of his economic plans. Navarro stressed the opposite: that the bigger risk is doing nothing, and allowing large trade deficits to continue.
He said the best reason to believe Trump will succeed is the likelihood other countries will see an advantage in accommodating him. America’s trade deficit, the Trump team argues, has unbalanced the global economy and held back growth. Eliminating it will end the current era of slow-growing advanced economies and unleash new prosperity for the whole world.
The Trump economic doctrine, then, would not be about winning against the rest of the world. It would be the whole world, winning together, by doing what Trump knows is best.