Trump is somewhat crazy, but he isn’t as stupid as his opponents would have you believe. He knows how to put the economy on track, but can’t do it from within the Republican party. He has stated many times “We make the money”, which is the basis of any possible fix to our ills. He would love to do a big spending bill on infrastructure, as that is the only campaign promise he could find support for in the house, but Republicans haven’t done infrastructure investment since Eisenhower.
I think he is also aware of the fact that imports are a wash from a macroeconomic perspective. We always get “real” resources and labor in return for the paper we mostly pull from our backsides. It was only the massive stupid of not investing part of the labor cost savings from imports into workers that made them a bad deal for the middle class. It really doesn’t make much difference who makes stuff as long as consumers have the purchasing power to buy it. That purchasing power can only come from injections of public money, as private sector bank debt can never net retire itself without it.
Reagan set the tone for the Republican relationship to labor with his union busting and that has remained as the hallmark of the party, in spite of getting most of its support from blue collar workers. He successfully transferred the blame for inflation away from the oil embargo and rapid rise in energy costs to the labor unions which were only trying to stay ahead of the across the board price increases the embargo caused.
Trump’s tariffs could easily cause a repeat of that period of stagflation, as even a 25% tariff isn’t sufficient motivation to bring heavy industry back to America. Even doing so would involve massive reinvestments in productive capabilities and obvious wage increases to enable consumers to buy what they make, both of which would strain our limited resources and add to inflation. Republicans have always rightly said we can’t tax our way to prosperity, but what part of tariffs do they think is anything but a tax? I believe Trump will find some way to claim victory while not really accomplishing much and the tariffs will be lifted to great applause from his econ ignorant voting base.
