New trade wars less growth and employment if Trump wins the presidential elections

The economic program with which Trump (to date) yes presents to the American Presidential elections in November is based on three pillars. A sharp increase in import tariffs aimed at bringing investment and jobs back to the United States. A substantial reduction in taxation, which would affect American businesses and families. The suspension of most aid for the energy transition, which would be distortive and penalizing. In particular, Trump proposed to introduce a 10% tariff on all American imports, including those from the main allied countriesthe. China, then, already the subject of an important 80 billion protectionist maneuver during the first mandate, would be further hit to reduce American dependence on Chinese goods that benefit from state subsidies and benefits.

Since the United States every year they import approximately $3.2 trillion in goods and services and today the average tariff is 2%, the new taxes that Trump would like to introduce would be worth just under 300 billion per year. Such a maneuver will most likely lead to an increase in prices and above all a trade war that will reduce global growth and increase geopolitical tensions. In fact, it is difficult not to think that other countries will not react with significant retaliation on the 2.1 trillion dollars of American exports around the world.

Heavy criticism of the proposal Trump they came from numerous American research bodies of both democratic and republican inspiration. The Tax Foundation, a progressive think tank, estimated that at first a 10% increase in tariffs would reduce US GDP by 0.7% and would destroy over half a million jobs. If we then consider the probable retaliations we must add a further one fall in GDP by 0.4% and a reduction in employment by another 300 thousand units . There are numerous transmission channels that lead to these results. Higher tariffs raise prices and reduce both consumer purchasing power and business profits, while the appreciation of the dollar produces a loss of competitiveness. Further negative consequences come from the damage suffered by other countries and their repercussions.

Similar results, although a little less strong, were predicted byAmerican Action Forum, a conservative think tank based in Washington. On the other hand, the experience of 2018, when Trump increased tariffs on China, also su steel, photovoltaic panels, washing machines and more worth 350 million, it was mainly American consumers who paid. In that case, however, the increased tariffs, given their non-general nature, were largely circumvented both through the triangulation of trade with other countries and through the relocation of Chinese companies to Vietnam, Indonesia and Mexico.

Even on the front of cutting taxes for businesses and families, Trump seems to want to continue what he had done during his first term, when he decided to reduce the rate on corporate profits from 35% to 21% and a series of cuts on the rates for families and businesses especially in favor of the richer ones. The total cost was nearly $2 trillion financed by more debt.

As cuts to individuals and families expire in 2025, Trump intends to at least make them permanent. He would also like to lower corporate taxation to 15%. On the one hand, this would lead to a further race to the bottom of corporate rates in the world: today the average rate in OECD countries is 26% and only Ireland, Luxembourg and Hungary have equal or lower rates. On the other hand, reducing the tax burden on businesses would lead to an increase in GDP, employment and American wages, but at the cost of an increase in the deficit and public debt, which are already high.

Also on the front of energy policy and climate change Trump’s electoral platform follows that of his previous mandate. On that occasion, Trump replaced, eliminated or dismantled more than 100 environmental regulations, from repealing the Clean Air Act to allowing coal plants to discharge toxic water into lakes and rivers. President Joe Biden he then reversed most of the measures taken before their full impact could be felt. Now Trump aims to dismantle the Inflation Reduction Act, (Ira), the historic 380 billion dollar legislation on climate change approved by the US Congress with a Democratic majority in August 2022, as well as a series of measures aimed at facilitating the extraction of hydrocarbons, which is already at its maximum, the abolition of any subsidies aimed at combating climate change, etc. The consequences for the planet are obvious given that the USA is the second largest producer of CO2 in the world.

In conclusion, Trump’s programmatic platform follows and expands that of his last mandate, with the obvious risk not only of endangering a sustainable future for America, but also of building a worse world. “Make world worse again”.