Image: watson/keystone/imago
The president-elect's economic policy is full of contradictions.
Follow me“He doesn’t really mean it that way,” is the standard response of Trump supporters who are not part of the hard core MAGA pack but still support him. It's also one of the many mysteries of current American politics that many of those who voted for Trump hope he won't keep his promises.
The financial markets have also integrated this thesis. This is why there was no reaction to Trump's announcement that he wanted to impose tariffs of 25% on Canada and Mexico, and 60% on China. “Why worry so much?” say Wall Street analysts. After all, it won't get so bad. Ultimately, Trump-appointed Finance Minister Scott Bessent explained that the tariffs would be implemented gradually, over a long period of time.
Donald Trump was voted “person of the year” by the magazine Time.Image: keystone
As everyone knows, homeopathy is mainly a matter of belief. The financial community also seems to have got it wrong. In his “person of the year” interview with the magazine TimeTrump made it clear that he, and he alone, would ultimately make the important decisions.
Regarding customs duties, the Wall Street Journal states: “The tariffs threatened by Donald Trump have triggered a behind-the-scenes lobbying campaign aimed at weakening the president-elect's plans. However, these efforts face an insurmountable obstacle: Trump does not want to give in.”
Scott Bessent, Treasury Secretary-designate, must implement Trump's tariff policies.Image: keystone
The Washington Postmeanwhile, reports that Trump's economic team is already working intensively on how to implement these tariffs as quickly as possible and avoid a fiasco this time around—as was the case with the entry ban for Muslims. In matters of customs duties, the president has broad powers, independent of Congress. According to some reports, Trump is even ready to declare a state of emergency to achieve his goals.
The president-elect is not only determined to implement the customs duties already announced – he has not consulted with his advisors on this subject – as quickly as possible, he has also mentioned other measures . If the BRICS countries tried to create an alternative to the dollar, he would hit them with a 100% tariff, Trump recently threatened.
It appears that Trump cares little that these tariffs are hitting his rural voters hard. Indeed, the countries concerned will most likely react with retaliatory measures, by also imposing customs duties on American imports. The United States exports a large quantity of agricultural products, particularly cereals.
To maintain farmers' support, Trump had to compensate them with $60 billion in subsidies during his first term. Farmers suffered huge losses because China no longer imported soybeans from the United States. With the tariffs now announced, these subsidies could increase even further.
Contradictions
Trump's economic policy is strewn with contradictions. In the Financial TimesGillian Tett name a few:
- Trump has promised to eradicate inflation again. But it is precisely its punitive customs duties which should continue to fuel inflation. Inflation has already risen to 2.7%.
- Recently, Trump promised not to fire Fed Chairman Jay Powell. From a legal point of view, this would not be very simple. But at the same time, he wants to force “the idiot Powell” to lower key rates. The original chairman of the Fed, however, does not allow himself to be commanded so easily.
- Trump wants a weak dollar. However, its policy of punitive customs duties causes exactly the opposite and strengthens the greenback.
- Trump rejects David Ricardo's classic trade theory that trade benefits all participants. But at the same time, his policy strengthens the dollar and thus indirectly favors imports. This is why his calculation aimed at balancing the trade balance does not work either.
- If the American economy is booming, it is mainly because it is fueled by government spending in the field of infrastructure. The deficit currently stands at more than 6% of gross domestic product (GDP). Trump wants to reduce this deficit to 3% of GDP. But at the same time he wants to massively cut taxes, especially for the rich and businesses, and fill this deficit with revenue from punitive customs duties. According to most economists, it is extremely difficult, if not impossible, to achieve all of these goals at once.
The biggest contradiction of the Trump administration, however, is that Republicans have recently defined themselves as the new party of working people. In contrast, the president-elect has filled his cabinet with billionaires. What's more, there are growing signs that this administration also wants to cut spending on Medicaid, a program that benefits mostly the poorest rural populations.
Translated and adapted by Noëline Flippe
