Analysis: Trump’s populist promises could kill the economy

The US presidential elections will be on the radar of the business world and fund managers with the first Biden-Trump TV debate to be held on June 27. While the two presidents are currently neck and neck in the polls, Trump is ahead in 5 critical states that will determine the president. Biden’s biggest handicap in TV debates is his language slips and forgetfulness due to old age. The weakness he will display during the debate will reduce the confidence of young voters, especially, that he will govern the country competently for 4 years.

Trump’s downside is his economic promises, which have been described as “crazy” by more than one economist. Here is Trump’s economic agenda that caused a reaction:

According to Reuters, if Donald Trump wins his second four-year term in the White House in the presidential elections in November, he plans to deport millions of immigrants, reshape global trade with additional customs duties and fill the bureaucracy with officials loyal to him.

Republican Trump has floated the idea of ​​imposing tariffs of 10 percent or more on all goods imported into the United States; He says the breakthrough would eliminate the trade deficit, but critics say it would lead to higher prices for American consumers and global economic instability.

He also said that he should have the authority to impose higher tariffs on countries that impose tariffs on American imports. He threatened to impose 200% customs duty on some imported cars.

The number one goal is China

Trump especially targets China. It proposes that China’s imports of electronics, steel and pharmaceuticals into the country be phased out within four years. It aims to ban Chinese companies from owning US infrastructure in their power and technology divisions.

Will it abolish income tax?

Donald Trump on Thursday floated the idea of ​​implementing an “import tax regime” that would get rid of U.S. income taxes, sources told CNBC after a closed-door meeting with the Republican front-runner.

According to another source present at the meeting, Trump plans to use customs tariffs to increase his negotiating power over US-allied states in his meeting with GOP lawmakers at the Capitol Hill Club in Washington DC.

Trump’s remarks about replacing income taxes with tariffs have sparked loud criticism. New York University School of Law professor David Kamin wrote in “Millions of Americans who pay no federal income tax would likely be covered by Trump’s tariff plan, “which looks like a massive tax increase for the lower/middle income classes.”

Trump has promised to reinstate his first-era policies targeting illegal border crossings, roll back Biden’s pro-immigrant measures, and continue with comprehensive new immigration restrictions.

Trump has promised to end refugee access at the US-Mexico border and embark on the largest deportation effort in American history. This promise will likely be blocked by Democrats in Congress.

How important is Trump?

According to the Financial Times, Trump and his advisers have announced a series of vague policies, many of which – if taken seriously – have the potential to undermine the core functions of the US economy.

While Trump has always targeted Jay Powell, he has said he could remove him from his position in a move that could jeopardize the Fed’s independence. At the same time, he promised to fight the “deep state” by putting independent institutions under the control of the White House. This attempt increased the possibility of paralysis of institutions that perform regulatory and supervisory duties in critical branches.

Robert Lighthizer, who is expected to be appointed Treasury Secretary, is said to be touting dollar devaluation to gain a competitive advantage in exports.

Trump’s trade policies could also lead to disaster. He proposed imposing a 10 percent tax on all imports and a 60 percent tax on Chinese goods. Such broad-based tariffs could again fuel inflation and bring the United States closer to open conflict with China. Customs duties could cause exponential damage to the American economy if domestic investments do not increase. It is already a possible scenario that if Trump, who opposes President Joe Biden’s Inflation Reduction Clause, wins, the private sector will reduce its investments.

America’s public debt increased rapidly during the Biden era. Trump’s planned tax cuts will increase the budget burden. Analysts are concerned that budget expenditures will not have the effect of stimulating economic activity in a higher interest rate environment. The promise to deport millions of undocumented workers may negatively affect both inflation and production, as it will reduce the availability of cheap labor.

Ultimately, more than one of Trump’s ideas is vague. His policies lack detail and, as in his first term, he may abandon them quickly. Some argue that the radical parts of Trump’s agenda are an attempt to curry favor with voters, citing Trump’s past vacillations as examples. They should be careful. In Trump’s second term, the “adults in the room” — the experienced statesmen who reined in his wild impulses — may be out of government. Trump’s second term seems likely to be driven by “revenge” against his enemies and the democratic system.