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What happens to the world economy if Trump Wins!

7/26/2016

1 Comment

 


What if Donald Trump wins and tries to impose the kind of anti-globalization tariffs and taxes on trade.  Aside from the obvious problems of doing this legally, but given his ability to do things in an extra-legal fashion on the idea that he is some kind of elected tyrant with a "mandate" to rebuild America in the image of some mythical time when America was "Great", and assuming that he doesn't get impeached by the Congress and carried out of the White House in a straight jacket, then it is fair to analyze the impact of what he has proposed over and over again on the US and world economy.

As someone who has warned against the dangers of rising rate deficits and completely open markets on the US economy starting long ago when I was the Senior Economist in the Pentagon and continuing to this moment in time when the horse has long been gone from the stable making reversing thirty years of avoiding the issue for fear to inciting the specter of protectionism, I know better than others the dangers of this strategy and fear its consequence.  Imports are damaging to smaller producers and there is no getting around this, but they are beneficial more often than not to the companies that import the products, and for workers who have incomes they offer cheaper products.  I usually used the ceiling fan as the best example.  Ceiling fans have been a ficture in drug stores since the 1930's, and were made in the United States by high end companies as fashion accessories with prices closer to $ 500 to 700 until probably around the mid-1970's.  But they were very expensive.  But as the electrical industry in Taiwan began to develop, entrepreneurs in the US said why not make then in Asia cheaper.  And by the end of that decade they were everywhere selling for sometimes under $ 150 or less and the market exploded.  So no doubt American consumers have benefited from everyday low prices.  So that is exactly the point--add a 45% tariff on Chinese and now Mexican imports and you will find that retail has nothing to sell and shipping companies nothing to ship, and workers in companies buying intermediate inputs will be laid off. 

That of course is a start of the snowball that comes from his ideas.  Lets deport 11 million workers most of them doing jobs that they alone can do.  All those old white factory workers I am sure voting for Mr. Trump (note he is always Mr. Trump like Kind Trump) will be willing to do roofing and yard work to replace the sudden loss of a good share of the work force concentrated in industries that no white or African American Americans might want to do.  And who will do the brick work and grunt work on Mr Trump's buildings or golf courses.  It would be a disaster for the economy and worse it would leave millions of dependents dependent on social services that will be starved by his tax cuts. 

Trump wants to cancel NAFTA and renegotiate all trade agreements.  I was in Geneva working at UNCTAD during the mid-1970's when the Tokyo Round was being negotiated.  You don't renegotiate agreements that take years to negotiate.  So if the US unilaterally repudiates the agreements we already have the world will retaliate.  Perhaps once we were large enough share of the world economy to dictate terms, but that was just after the end of World War II.  In today's globalized economy we can't dictate terms.  Reneging on our obligations would open the door to global protection and the result will be a disruption in global supply chains and likely an increase in inflation everywhere.  What is unlikely to happen is that factory jobs will suddenly and miraculously return to these shores.  A more likely result will be economic and social collapse.  Perhaps this is the reason for the plan -- an economic emergency allowing Trump to ask for a period of extra-legal powers to right the sinking ship.

There are ways that can help rebuild localized manufacturing that will not destroy the US or world economy.  Companies have to be more sensitive to workers needs and share more of the gains form globalization on workers from the top to the bottom.  But Trump's vision is not the way to solve the pressing issuesof wage inequality and underemployment.  It is time for the Democrats to lay out the truth, to paints the scenario in the starkest terms to the misguiding and angry electorate who support this demagogic megalomaniac  who has captured the Republican Party. 

1 Comment
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11/9/2019 05:19:55 am

Well, I cannot say that all these predictions are turning into a reality, but can say that we are better off during the previous administration. I did not vote for Mr. Donald Trump, but I am not bashing nor shading him before because I am after the welfare of the country and whoever can make the country progress has my support. But right now, the economy seems to be either steady or falling down. I don't know exactly, but growth is simply out of reach as of the moment.

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    Dr. David L Blond is a well known economists with experience in government and the private sector. Published in 2014, The Phoenix Year, an economic thriller about the events leading up to the global market collapse  New novel available on Kindle --The Rings of Armageddon based on insights learned during his 7 years as the Senior and only economist in the Office of the Secretary of Defense at the Pentagon. 

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Dr. David L Blond at querieconomics@gmail.com / 301-704-8942
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