Trump: my assessment 18 months on

elocal Magazine, ed. 208. 30 June 2018

Shortly after his election in November 2016, I wrote an article for elocal headed “Could President Trump be as dangerous as candidate Trump sounded”.  I concluded that article by quoting political commentator Matthew Hooton with approval saying that

“If [Mr Trump] turns out to be a lunatic and follows through on his promises, the US and the world risk near certain global recession and possible catastrophic war.  But if he turns out only to have been a liar, then how will his supporters react in four years if they feel betrayed yet again?  Dark times lie ahead…”[1]

Well, 18 months on, was I too pessimistic?

Let me admit at once that some of the things President Trump has been trying to do I strongly approve of.  The United States economy, like some aspects of the New Zealand economy, is grossly over-regulated, and Mr Trump has been making some progress in reducing that over-regulation.

The American corporate tax rate, at 36%, was one of the highest in the world, offset by a raft of deductions and exceptions making that rate a nonsense for many companies.  Much better to reduce the rate and eliminate some of the deductions and exceptions, as the President has attempted to do.

The US economy continues to truck along with no sign of an imminent recession, and with the US share market continuing to rise to new records almost every month.

Thanks to the American constitution dividing power between the President and Congress, Mr Trump has not been able to implement some of his more ridiculous campaign promises, like building a wall along the Mexican-US border (and getting Mexico to pay for it) or scrapping Obamacare.

And at time of writing, the President has just concluded a meeting with the leader of North Korea, Kim Jong Un, which, to judge from the President’s own rhetoric, ushers in a joyous era of “peace in our time”.

But my own assessment remains almost entirely negative.

As The Economist noted after the Singapore summit between the President and Kim Jong Un, “the rhetoric didn’t quite match the reality.  The most substantial thing to come out of the summit may well have been the dark chocolate tart served at the ‘working lunch’ which Mr Trump and Mr Kim held with their delegations after meeting face to face.”[2] 

Other assessments of the summit have been similar, noting that while there may have been a positive improvement in the tone of the US-North Korea relationship, nothing of substance has yet been achieved.   North Korea has reneged on lots of promises to abandon its nuclear weapon programme in the past.

And it’s not even clear why North Korea should trust the US.  Mr Trump has just withdrawn from an agreement restricting Iran’s development of nuclear weapons with a promise to impose seriously damaging sanctions on that country, despite that agreement having been formally negotiated over nearly two years and involving not just the US but the United Kingdom, Germany, France, Russia, China and the European Union.

While I agree in principle with reducing taxes, what Mr Trump has done in reducing taxes while making no serious attempt to reduce federal government spending is absolutely the wrong thing to be doing at this stage of the economic cycle, when the economy is already growing strongly.  Fiscal stimulus at this stage of the cycle will force the US central bank to push up interest rates faster than would otherwise have been the case, pushing up the US dollar relative to other currencies, and exacerbating the American trade deficit which the President seems to care about so deeply.

Actually, the President does care about that deficit but his understanding of what the deficit means is totally flawed.  He sees any bilateral deficit as proof that the other country is taking advantage of the US.  No economist anywhere shares that simplistic view.

One of Mr Trump’s first actions as President was to withdraw the US from the Trans-Pacific Partnership, despite near universal agreement that that trade agreement was going to be beneficial to all the countries involved, including the United States.  Indeed, those in New Zealand who opposed the agreement did so mainly because they believed it was too beneficial to the United States.

He has been engaged in negotiations with Mexico and Canada to rewrite the North American Free Trade Agreement almost since assuming office, and at this stage there seems a real possibility that that agreement too may be torn up, despite its having enormous benefits to all three countries since its inception in 1994.

On the extraordinary pretext that importing steel and aluminium from Canada and the European Union somehow threatens US national security, he has imposed tariffs on those imports.  He has also announced tariffs on US$50 billion of imports from China.   All those countries have announced tariffs in retaliation, or have announced plans to impose such tariffs.

Mr Trump has threatened them with further trade restrictions if they do so, and has suggested his next target could be car imports.  He is capriciously tearing up the international trading system which has served the world, including the United States, so well since 1945.

In June, the world watched as Mr Trump made sweet talk with Kim Jong Un while almost simultaneously insulting the Prime Minister of Canada, disowning a communique he had agreed to only hours earlier with the other six countries of the G7, and calling for Russia’s admission to the G7.

The world is on a very dangerous path and Mr Trump must take most of the responsibility for that.



[1]National Business Review, November 2016.

[2]The Economist Daily dispatch, 12 June 2018.

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