A couple of nights ago I happened to catch part of Donald Trump's campaign speech in Iowa -- not a state he's had much cause to visit in the past, I'm guessing.
Amid all the stream-of-consciousness stuff -- how rich he is, how smart he is, how he can't be bought, how real his hair is -- he was spelling out his approach to economics. It's clear that his major influences in this area are not the likes of Keynes or Friedman, but Ross Perot. Remember the failed presidential bid where Perot's catchphrase was the "giant sucking sound" of US businesses hightailing it to Mexico? That's what Trump is peddling.
The Donald's way of making his point was to imagine a conversation between a newly-minted President Trump and the head of Ford Motor Company. Said exec was notionally calling the White House to advise President Trump that Ford was about to outsource more production to Mexico. I wasn't aware that companies were required to do this but hey, I'm Canadian, so what do I know? Smart, rich, incorruptible President Trump's response is to threaten that if Ford goes ahead, all of the company's products will immediately face a 35 percent tariff., Needless to say, Ford crumples under the threat -- "by 4 o'clock the same day, or next morning at the latest".
Imposition of such a tariff would, of course, violate all of the free trade pacts that the US has entered into in recent years under both Democratic and Republican presidents, though one supposes that minor quibble would not carry much weight with a man who wants to build a 1900-mile wall along the border with Mexico (and have the Mexicans pay for it). It would also, if applied across the board, massively increase the cost of living in the US, as imports from Mexico or China or wherever dried up, to be replaced by higher cost domestically-made products. The reduction in the standard of living for the kind of angry middle-class voters who seem to be backing Trump would be severe, but that reality gets lost in all the populist blather that makes up most of Trump's speeches.
Earlier this week someone posted a tweet suggesting that the global selloff in stock markets was the result of fears about Trump becoming president. I think it was meant as a joke, but if it ever became truly likely that Trump and his hare-brained economic ideas could end up in the White House, the market reaction would make this week's gyrations look like a mere dress rehearsal.
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