Donald Trump was going to continue loudly advocating protectionist trade policies in 2024 and demand more control over the Federal Reserve. His strategy has been primarily based on large tariffs on a broad array of imports, especially China. The rationale for greater tariffs in the case of Trump is that these would protect manufacturing in America by lowering trade deficits that could spur growth. However, economists and critics argue that the general effects of his policies are inflationary, raise consumers’ costs, and affect the rest of the world.
Trump’s Trade War Strategy
Trump has advocated for a hard line trade policy, especially with China, and rhetoric has only intensified over the past year. The last proposal includes up to 60% tariffs on Chinese imports as well as expansion of tariffs from 10-20% on all imported items. In his support of the theory that this will indeed level the playing field for U.S. manufacturers in protecting domestic industries from foreign competition and reducing reliance on imported goods, he wants this. He boasts that the revenues from tariffs will reduce the national deficit, at the same time motivating companies to bring manufacturing jobs back into the U.S.
The former president hasn’t been shy about touting the populist appeal of his tariff plan. Trump says on the stump and in interviews he is a patriot who wants to defend the American job, assailing countries like China, Mexico, and Canada over what he sees as an unfair trade balance. He avers that the levies would invest back into U.S. industries. His fans suggest that this might stimulate steel, automotive, or textile industries, among others. Trump has framed his tariff proposals within a broader economic “America First” agenda, continuing the protectionist policies that characterized his first term in office.
Economic and Political Effects
While confidence streams from Trump’s mouth about his trade policy, economists have even raised substantial concerns about the ramifications on the economy. For example, the American Action Forum estimated that tariffs proposed by Mr. Trump could increase the average annual expenditure of a typical American household by nearly $3,900. Other analyses indicate that these tariffs would have inflationary effects, further raising consumer goods prices, and would drastically disrupt global supply chains.
The Peterson Institute for International Economics has warned that such broad tariffs would be painful not only for consumers but also for the U.S. relationships with important trade partners. As the institute observes, such policies will negatively affect American workers by making U.S. goods less competitive in the world because of retaliatory tariffs imposed by other countries.
Politically, the reaction to Trump’s tariff plan is mixed. His base, particularly in areas most affected by deindustrialization, remains enthusiastic about a prospective economic nationalism. The business community—no friend of Trump, but anathema to his ideas of America first—is objecting to the risk of tariffs triggering a flight back to welfare states or simply causing costs to rise for both businesses and consumers.
In addition, Trump has been consistent in his rhetoric regarding reshaping the Federal Reserve. While criticizing the Fed for not cutting interest rates sufficiently for the period when he was president to serve in support of more expansionary fiscal policies, Trump still maintains that the Federal Reserve should be acting more accommodatively—especially during uncertain economic times.
Trump’s call for more authority over the Fed represents a larger impulse among some Republicans to politicize an institution long supposed to remain outside the fray. He said that if re-elected, he would make appointments to the Federal Reserve Board more aligned with his agenda, driving that institution toward policies that would serve his economic vision. Critics argue that the undermining of the Fed’s independence will endanger financial markets to see the potential risky money policy on base of the threats of political terms to achieve quick gains but lesser long-term stable economic outcomes.
The Road Ahead
Because his economic proposals, including his plan for tariffs and demands for increased Fed influence, will likely form a core element of his eventual 2024 campaign, this could be a contentious area for him. Protectionist trade policies are likely to appeal to his core supporters, but the broader economic and political implications of these measures will likely produce great controversy in their own right.
Moreover, Trump’s tariffs are going to make the inflation situation even worse and bruise the U.S. consumer, and any attempts by Trump to politicize the Fed will degrade the credibility of the institution. As the elections near, all of these issues will keep on simmering with regards to what direction the country’s economic policy should take and the balance between protecting domestic industries and participation in the global economy.
On substance, Trump’s proposals reflect his bigger vision for an economic nationalism that would advance American industries, even if it means consumer price inflation and occasional strained international relationships. It now remains to be seen whether voters will eventually embrace this vision again, but one thing is clear: Trump is doubling down on the populist themes of the early elements of his first presidency.
