Make America Great Again hats sit on a table during a campaign rally for former US President and Republican presidential nominee Donald Trump at Sunset Park in Las Vegas, Nev. on June 9.IAN MAULE/Getty Images
The pre-Donald Trump Republican Party held certain core economic beliefs. Some were almost religious creeds.
It believed in free trade and free movement of capital, and lowering barriers to both. It did not worry much about multinationals sending investment and manufacturing jobs to places like China. It believed that more government was bad, less government was good and markets always worked. It was in favour of balancing the U.S. federal budget, but since mention of tax increases was heresy, it spent a lot of time scheming about privatizing Social Security – the equivalent of the Canada Pension Plan – or downsizing Medicare, the program of health care for U.S. seniors.
Mr. Trump became the GOP nominee in 2016, defeating a cast of conventional Republicans, because he recognized that that party’s neo-conservative operating principles were more appealing to corporate donors than its increasingly blue-collar voters. Mr. Art-of-the-Deal understood that selling less Social Security and less job security was a lot harder than dangling a future of more Social Security and more job security. So he promised the latter, and won.
Eight years on, the Republican Party is now a wholly-owned subsidiary of Mr. Trump’s MAGA movement. But what does MAGA – Make America Great Again – believe in? If Mr. Trump wins in November, what would be his economic policies?
That’s not as easy to answer as it should be. The Republican platform is loud but often vague; MAGA is partly a personality cult; and Mr. Trump in office was impulsive and unpredictable. To some extent, MAGA is whatever he says it is.
But to a greater extent than ever, MAGA is also a set of ideas, with thinkers and think tanks fleshing out what post-neo-conservative conservatism means. That Mr. Trump chose J.D. Vance as his running mate is illustrative.
Eight years ago, Mr. Vance was a conventional Republican and an anti-Trumper. He is now one of the chief ideologists of MAGA, and the heir apparent.
In an interview this summer with The New York Times, Mr. Vance talked about his antipathy to traditional, pro-business Republicans, and how the people on the left “whose politics I’m open to” are the “Bernie Bros.,” meaning supporters of Senator Bernie Sanders.
The far-left’s long-standing criticisms of globalization are partly shared by MAGA. Both believe that the movement of investment and jobs out of the United States, above all to China, has been bad for the American working class. There’s a fair bit of evidence that’s true.
In a second Trump administration, expect more tariffs and other actions to lower the U.S. trade deficit, particularly with China; more nudges and shoves to “reshore” manufacturing (especially from China); and more carrots and sticks for strategic industries, such as semi-conductors, to get them to manufacture in the U.S. rather than overseas (especially China).
The Biden administration is already doing a lot of this, which shows how much things have also changed in the Democratic Party. A second Trump term promises more, done more aggressively and perhaps recklessly.
The bad news for Canada is that we risk becoming collateral damage in a world of more managed trade and less free trade, since the U.S. is by far our largest trading partner. The good news for Canada is that we are mostly not the intended target.
The U.S. runs a large trade deficit with Canada, but not after you take our energy exports out of the mix. It’s hard to imagine a future Trump administration building a tariff wall to raise the price of oil from Canada. MAGA’s concern is manufacturing jobs, manufacturing imports and manufacturing offshoring. Cheap oil and gas are goals, not problems.
More good news for Canada: Mr. Trump treated the renegotiation of NAFTA into USMCA as a major accomplishment of his first administration. The same goes for Robert Lighthizer, the U.S. Trade Representative who negotiated the deal. The Trump administration’s primary target was auto and other manufacturers being lured to low-wage Mexico. Canada and the U.S. have relatively balanced trade in autos.
One big challenge for MAGA’s trade and industrial policy is that its parts don’t easily fit together.
The movement retains the traditional GOP distrust of government, yet managed trade means a lot more government control over the decisions of private business. Deciding which industries and companies are “strategic” is inherently political. The more politicians make those calls, the more businesses will ramp up lobbying and funding of politicians.
Using tariffs and subsidies to return more manufacturing the U.S., with the aim of lowering imports and boosting exports, will tend to push up the U.S. dollar. That, paradoxically, will tend to make U.S. exports more expensive, and imports cheaper.
There’s also the problem that U.S. exports can’t rise if other countries respond with protectionist measures for their own manufacturers. We can’t all export more and import less.
Unless Washington is careful to pair plans for reducing trade with China with plans to simultaneously protect and deepen trade with allies such as Canada, Japan and the European Union, MAGA risks spiralling us into an escalating series of global trade wars.