Trumponomics Is So Ridiculous
Trump's policies in regards to economics are so ridiculous, and I wanted to talk about it.
The two main things he's focusing on so far are throwing out immigrants and tariffs. And I want to take a moment to talk about both in regards to economics.
Firstly, Trump is constantly upset about trade deficits that the United States has.
Now, first I need to briefly remind everyone what a trade deficit is in practice. A trade deficit is when someone gives you more real, tangible stuff than you give them, basically. Now, when you put it like that it becomes pretty obvious why this isn't necessarily always a problem.
A big problem that some countries have with trade deficits, and this is a real one, is that a lot of trade is conducted in dollars. Which means that some countries can't keep running a trade deficit because at a certain point they won't be able to get vital imports anymore. They need a source of dollars.
The U.S. obviously does not have this problem though. Both because it has a huge amount of dollars and because it can literally print more of them if it needs to.
And because the U.S. dollar is already the reserve currency and in such incredibly high demand, the fed can actually print (or borrow) a LOT of money without much of a problem.
And, no, the inflation we just went through wasn't because of printing dollars. It was primarily because of supply line issues due to the pandemic, sudden changes in spending habits and the Russia-Ukraine war lowering the supply of things like grain and fossil fuels.
So, this is already one reason why this isn't a major problem. But there's a second reason.
Which is that you can't look at trade deficits in terms of a deficit with a particular country. Bilateral trade deficits are virtually meaningless in most contexts. Rather you need to look at the trade balance on the whole to make these sorts of decisions anyway.
Because if you have a trade deficit with Country A but a trade surplus with Country B of the same size and then Country A and Country B trade, there basically isn't even a real deficit.
But because Trump is a moron who can only see things through the lense of a zero sum game where he sees this as America's money flowing out of the country, he doesn't seem to understand this.
So using tariffs for this purpose is already pretty ridiculous. But there are even MORE reasons why it's ridiculous.
What do tariffs do? They increase the price of foreign goods to make them more competitive with domestically produced alternatives.
This means that, first of all, it isn't a good way to make any kind of profit (at least for the average person). Because companies will usually pass on these additional expenses to consumers if they can, and then consumers will pay these tariffs. Which means that tariffs are basically a giant recessive tax. Which, hey, maybe that's why Trump likes them so much.
Then you also have to remember that domestically produced goods are not infinite. Instead the goods that can be produced domestically are essentially limited by the combination of availability of resources and of labour.
Not all resources are available or available in sufficient quantities in the United States. A tariff on those is, as a result, ridiculous on the face of it. Since there is no viable domestic alternative, or at least not in sufficient quantities. Which means a tariff is basically just a price hike.
But then for those things that do have domestic alternatives and sufficient resources to produce them, you still have a limited amount of labour. There aren't an infinite amount of people to make stuff. At a certain point you just run out of people to make those domestic alternatives, at which point all that happens is a lot of demand for less supply which means higher prices aka inflation.
The U.S. unemployment rate is about 4.1%. That is EXTREMELY low already. In other words, the amount of still available labour is actually already rather limited. Though I guess Trump is attempting to dump a bunch of people in the public sector into the private sector. But nevertheless, the point is there is already high employment. Which means the amount of additional domestic supply of goods that can still be created is already pretty low. Which means tariffs that incentivise domestic purchases are just a bad idea. Because there isn't even enough labour to create all the stuff Americans need to buy. Which means they have to buy it abroad which means, you guessed it, basically a recessive tax they have to pay.
And the cherry on top, of course, is that he's kicking as many immigrants as he can out of the country.
Now I know that the right likes to pretend like all immigrants are lazy wellfare queens. But the reality is that most of them work jobs. And a lot of them work jobs Americans don't even want to work.
So Trump is literally going to inflate the amount of demand for domestic goods, while reducing the labour force which is needed to create the supply. You see where I'm going with this?
Trumponomics is ridiculous.
I'd say there are really only two options here:
- Trump is a complete idiot who got fixated on tariffs but they're stupid.
- Trump is trying to implement a system of recessive taxes and restricted supply to boost corporate profits.
I can't think of any other reasons.