The Economics of Trump

C Adam Pfander

Our coverage of the 2016 Presidential campaign now turns to the leading Republican candidate, Donald Trump. Trump’s economic philosophy is familiar within the Republican Party: a top-down approach that loosens regulation on big business. The core engine of this belief is that bigger businesses hire more people, creating jobs and boosting output. But beyond simply toeing the party line, the business magnate – true to form – is full of bold, broad goals on the economy. 

The first of Trump’s proposals regards trade policy. The candidate wants to completely overhaul the United States’ trade agreements, especially with China. Beyond simply negotiating better trade terms, Trump has outlined a plan to fundamentally change how the US deals with China. 

First and foremost, Trump will declare China a “currency manipulator” – a conviction, which means a country is deliberately undervaluing its currency to steal trade from its neighbors. Should Trump win such a declaration, the US will heavily tax Chinese imports. Such bold action is designed to force China to accept better trade terms. However, many economists – including the International Monetary Fund and the Bank for International Settlements – feel that the Chinese yuan is actually overvalued by as much as 50 percent, according to the International Business Times.

Further, Trump wishes to close the trade deficit with China. That is, he wants to sell more American-made goods to China, while buying fewer Chinese products. To accomplish this goal, the candidate wants to hold Chinese businesses to higher labor, environmental, and intellectual property standards – regulatory practices, which should make Chinese goods more expensive. Further, Trump wants to subsidize American manufacturing, while imposing tariffs on Chinese imports. These practices are designed to end China’s global dominance in industrial manufacturing.

The second of Trump’s proposals targets tax reform. Like many Republicans, Trump wants to lower taxes across the board. His tax plan would eliminate income taxes on households earning less than $50,000 per year; income taxes for the remainder would decrease by an average of $1,000 per year. He also wants to cap taxes on businesses at 15 percent. However, breaking from the traditional party line, Trump also wants to close many tax loopholes for the wealthy, effectively raising rates on the highest earners. However, Trump’s plan has come under fire for not covering the government’s budget. The Tax Policy Center, a collaboration between the Urban Institute and the Brookings Institution, estimates that Trump’s tax plan would create an additional $9.5 billion dollars in debt over the next decade.

The last of Trump’s proposals is not directly targeted at the economy, but has definite economic implications. Trump’s policy of expelling illegal immigrants is frequently decried as damaging to the American economy. Currently, illegal immigrants compose 5.1 percent of the domestic workforce according to the Pew Research Center. Further, his proposed plan of making citizenship more difficult to acquire hampers future growth. This constraint on the workforce could hamper the ability of the American economy to grow. In a poll of 22 conservative and liberal leaning economists conducted by NPR, all 22 agreed that Donald Trump’s immigration policy would be bad for the economy.