You have to give him credit.
When it comes to the economy, President Trump is doing what he said he would do if he got to the White House. It took him nearly a year to get going, but he is now following through on his "America First" dogma.
Picking a trade war with the rest of the world is a core plank of America First. To date, Trump has hiked tariffs on some $100 billion worth of imports from foes like China as well as friends, including Canada, Europe, Japan, and Mexico. And he is threatening to do much more by increasing tariffs on all imports from China, over $500 billion worth, and on close to $300 billion in auto imports — together, about one-third of all that we import.
Our trading partners aren't taking this lying down. They have matched Trump's tariffs one-for-one on U.S. exports to their countries. Our farmers are feeling it firsthand. The Chinese have also allowed their currency to fall in value against the dollar, offsetting some of the bite of higher U.S. tariffs.
America First is also about making things difficult for immigrants, including those already living here. Separating immigrant children from their parents who are legally seeking asylum is only the most egregious example of this harassment. Even the world's best and brightest, who come to study in our universities, find it difficult to stay once they graduate. Many go back home, where they start companies and create jobs.
Immigrants — who are risk-taking and often entrepreneurial — are critical to our economic success, accounting for all of the growth in our workforce and then some as they fill the void left by retiring baby boomers. Our farmers, hotel and restaurant owners, and construction and transportation companies are struggling to fill a record number of job openings, and the crackdown on immigration is a factor.
The president's America First agenda is also about strong-arming the global economy. Trump's decision to cancel the nuclear deal with Iran is a good example. The other parties to that deal, including Canada, China, Germany, and France, are still honoring it. Upset by this, the president is threatening sanctions on companies in those countries that continue to do business with Iran. This is no idle threat. Cutting them off from the U.S. financial system would be crippling.
This all sounds pretty alarming. So why are our economy and stock market so strong? Unemployment is a low 4 percent and the S&P 500 is near a record high. Why aren't businesses and investors sounding alarms if America First is such bad economic policy?
Trump's deficit-financed tax cuts and government spending increases are part of the explanation. Following through on these campaign promises gave corporations a one-time windfall from a lower tax rate that is temporarily juicing up the economy. The big increase in GDP last quarter, which the president was sure to be trumpeting in his tweets this weekend, isn't sustainable for more than a year or two.
Here's why: If you borrowed a pile of money and used it to finance a spending spree, how would you feel? Probably great, at least while you have the cash for nicer clothes and swankier restaurants. A nagging voice may ask what happens when the cash runs out and you have to pay back what you borrowed, but that problem is for another day. However, that day will come, and then how will you feel? Businesses and investors will feel the same way.
Some take solace in the hope that America First is simply a lever to pry concessions from the rest of the world. If it looks as if it is doing damage to the economy and stock market, Trump will back away, declaring victory to cover his tracks. The president effectively said last week on CNBC that this was a good time to have a trade war because the economy was strong and could handle it. Presumably, this means that if the economy weakens too much, it will no longer be a good time to wage such a war.
But if America First is a negotiating ploy, and everyone knows it, how good a ploy could it be? Would the Chinese, Germans, or any of the other trading partners fail to understand what the president is up to?
Regardless of how this game plays out, Trump's America First is doing long-term damage to the American economy. The world increasingly distrusts us. Our economic success rests on the world's trust that we are a country that follows the rules. We had this trust in part because we wrote the rules, but also because we still followed them when it wasn't completely convenient to do so, knowing it would ultimately pay off.