Trump’s advisers are promising that the candidate’s policies will give economic growth a huge bump, while also claiming his proposals won’t add to the federal deficit. All of this will be achieved with a key ingredient: sheer willpower.
Peter Navarro, an economist at UC Irvine, and Wilbur Ross, a billionaire investor, both advisers to the campaign, released a new report offering their own analysis of Trump’s economic policies. They promise an annual economic growth rate of 3.5 percent, far higher than what the U.S. has seen in the last decade or what is forecast for the future.
And they argue that the candidate’s trade policy alone would generate three-quarters of the revenue growth that would be needed to make the tax package deficit-neutral.
How would Trump achieve these goals? Just by showcasing how strong he is.
The Tax Foundation recently found that price tag for Trump’s tax plan was $2.6 trillion over a decade, although only assuming he follows through on taxing real estate and law firms at a higher rate — something he has not clarified — and baking in usually unrealistic assumptions about tax cuts spurring the economy. Navarro and Ross’s report claims that the biggest driver of increased government revenues to make up for that cost will be trade, coming up with $1.7 trillion out of a total of $2.4 trillion over a decade.
The paper also claims that Trump will revive millions of manufacturing jobs. But while trade policies have been found to have significantly reduced those jobs, that doesn’t necessarily mean a shift in policy will quickly or easily bring them back. The industry has also become much more efficient, relying on fewer workers to get the same things made.
When it comes to China manipulating its currency or deploying unfair trade practices, which Trump’s advisers say have hurt economic growth, they claim the country will simply back off of its tactics with Trump in the White House. “Our view is that China’s leaders will quickly understand they are facing strength on the trade issue in Trump rather than the kind of weakness on trade that has characterized the Obama-Clinton years,” Navarro and Ross write. “Just as these Chinese leaders have been exploiting American weakness by cheating in the trade arena, they will acknowledge the strength and resoluteness of Trump and rein in their mercantilist impulses.”
Similarly, they argue that the country can “use its status as the world’s largest economy, the world’s largest consumer, and the world’s largest importer” to pressure the World Trade Organization on changes in tax treatment that they say disadvantage the U.S.
Trump, they say, will also somehow successfully renegotiate “bad trade deals” through sheer fortitude. When it comes to the trade deal struck with South Korea in 2012, for example, they write that with a President Trump “South Korea will have no grounds to complain when Trump calls for a renegotiation” and that the two countries “will simply seek a far more equitable deal.”
They also claim both that the United States is already in a trade war, and that Trump will avoid creating a deeper one in which countries levy escalating tariffs on American products to retaliate for tariffs we’ve levied on theirs. “Those who suggest that Trump trade policies will ignite a trade war ignore the fact that we are already engaged in a trade war,” they write. “[A]s Trump pursues a policy of more balanced trade, our major trading partners are far more likely to cooperate with an America resolute about balancing its trade than they are likely to provoke a trade war.”
But economists have predicted that overly aggressive trade policies, such as slapping entire countries with tariffs and ripping up existing trade agreements, would indeed spark retaliation. If Trump’s isn’t able to avoid an escalating trade war, it would have the opposite outcome than what he’s looking for. According to a recent analysis from the Peterson Institute, an organization that supports free trade, if Trump’s policies started a trade war it would send the economy into a recession and cost more than 4 million jobs. Another analysis from Moody’s found that if Mexico and China retaliated against tariffs on their imports, it would cost the country 7 million jobs.