Conservative Political Commentary

...anti-socialist, anti-globalist, and usually with an attempt at historical and economic context

Tuesday, April 26, 2016

Can Trump Make America Great Again? Doubtful.

Donald Trump
Peter Schiff
By Eddie Howell

Donald Trump has a catchy phrase: “Make America Great Again.” But in every major area that presidential politics must address, serious doubts arise as to foreign policy, domestic policy, and economic policy. If he is to succeed in economic policy (if he becomes president), he will need to rethink what he's been saying about trade policy. As it is, he'd be an improvement over Barack Obama, and be much, much better than Hillary Clinton.

Trump likes the idea of threatening or imposing tariffs on trade partners he regards as unfair to America. Certainly, many improvements can be made in regard to American trade policy, but Trump's plan does not look like the answer.

Fee.org (Foundation for Economic Education) analyzes the effects of the Smoot-Hawley Tariffs (1930) in regard to its contribution to the Great Depression, and finds that its negative effects were more profound than many economic historians believe today, and finds fault with their economic models. For instance,
[I]f losses of GNP were not evenly distributed across the economy but were concentrated (say, in export-oriented states), the tariff most likely distorted monetary conditions significantly. Two percent of GNP does not sound like a big change, but if it’s concentrated in one-fifth to one-third of the states, it’s very large indeed. The tariff dramatically lowered U.S. exports, from $7 billion in 1929 to $2.4 billion in 1932, and a large portion of U.S. exports were agricultural; therefore it cannot be assumed that the microeconomic inefficiencies were evenly distributed. Many individual states suffered severe drops in farm incomes due to collapsing export markets arising from foreign retaliation, and it’s no coincidence that rural farm banks in the Midwest and southern states began failing by the thousands.

Donald Trump should understand that the tariffs he has in mind would be counterproductive. Peter Schiff has the following straight-forward analysis of why Trump's tariffs wouldn't work.


I should note that Schiff is predicting a major economic collapse soon, which would render the tariff issue moot. Schiff makes sense on tariffs and lots of other things, but, while there are danger signs, the kind of collapse Schiff predicts seems unlikely in the near future, especially if Obama's regime is replaced by a pro-growth administration. At least we can hope so.

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