Many Americans may find this perplexing, but the way to Making America Great Again appears to require reducing the economy and lowering employment, rising prices across the board, and devaluing the dollar. Foreign countries that have long mistreated the United States will be punished by seizing investment capital that might otherwise have arrived here.
Many of Donald Trump’s campaign pledges were dismissed as useless. The promise to make car loan interest payments tax deductible, along with promises to exempt tips and Social Security payments from taxes or restore state and local tax deductions, can be interpreted as empty electoral pandering to Americans with car loans, restaurant workers, the elderly, and so on.
There is, however, a core to Trump’s worldview. It revolves around a belief that the United States “has been ripped off for years” by the whole wide world — with the possible exception of Vladimir Putin’s Russia and Viktor Orban’s Hungary. Foreign exporters not only abuse U.S. markets, but also they empty their prisons and insane asylums to send millions upon millions of criminal migrants America’s way.
The only right answer in the MAGAverse is to punish foreign abusers and isolate America to protect it from future mistreatment.
Two of Trump’s promises, repeated endlessly with the emotional delivery that men tend to reserve for bar brawls, are closely related to this belief set: the promise to deport millions of immigrants, and the plan to limit the world’s access to US markets by raising tariffs — primarily on imports from China, but also on those from elsewhere.
These threats have been too casually lumped in with Trump’s stream of implausible promises and statements — entangled in Trump’s rhetorical weave. Unfortunately for us all, he threatens tariffs and deportations with the passion of a true believer.
How awful is it? Three economists, Warwick McKibbin of the Australian National University, Megan Hogan, and Marcus Noland of the Peterson Institute for International Economics, incorporated Trump’s proposals into a multicountry economic model commonly used by central banks, government agencies, and international institutions to assess scenarios and analyze policy.
They factored in the deportation of 8.3 million undocumented immigrants anticipated to be working across the economy. They slapped a 60% tax on Chinese goods and a 10% duty on imports from all other countries.
They added a third possible outcome that aligns well with Trump’s deep-seated desire for absolute power: that he would end the political independence of the Federal Reserve to steer interest rates and the dollar’s exchange rate to propel faster economic growth and terminate the nation’s trade deficit.
If Trump got all he asked for, the model said, the outcome would be pretty bad.
Trump could claim a “win”: The current account deficit — the broadest measure of the nation’s trade balance — would snap into a surplus, a longtime dream of the former president’s. But that would be wholly a product of capital fleeing the United States, starving the country’s economy of resources to purchase imports.
What would have gone wrong? Standing annoyingly in the way of Trump’s MAGA dream is math.
Deporting 5 percent of the workforce would deliver a massive double whammy to the economy. It would boost inflation (through rising wages) even as it slowed growth by curbing consumer spending (immigrants are consumers) and investment as businesses with fewer workers to hire would invest less in themselves. This would ultimately cause deeper job losses.
Other countries, moreover, would probably not take kindly to Trump’s tariffs and retaliate with tariffs of their own, blocking U.S. exports and further slowing economic growth in the United States.
Finally, curbing the Fed’s independence would deliver the coup de grâce. If Trump pushed rates down to goose growth, GDP and employment might get a short-term boost. But that growth would soon be eaten up by higher inflation. And, ominously, investors’ mistrust of a Trump-led Fed would surely spur substantial capital flight.
But one should not assume that Trump would be easily deterred. After struggling with grown-ups in his first administration, he would be unlikely to bring many into a second. And congressional Republicans looking to get in Trump’s way would first have to find their spines.
Perhaps the ultimate irony is that Trump’s red-hat supporters will be the hardest hit by his policies. The MAGA contingent may believe that burning down the house is OK in order to punish the leftist elites who populate blue coastal America. Working-class Americans’ homes, however, would be the first to burn down. Tariffs, for example, are especially destructive to the poor, who spend the majority of their earnings and have little left over to save. The wealthy pay the “tariff tax” on a significantly lesser percentage of their earnings.
As a result, the United States would have retaliated against the rest of the globe by committing economic suicide in order to assert its hegemony and restore its greatness.
