A Report: Notes on President Trump's Policies

by Prof. Andre Blaszczynski

Trump and globe image courtesy of Unsplash. Used via licensing from Wix.

A WORD FROM OUR PUBLISHER: The following report consists of detailed notes on President Donald Trump's policies by Professor Andre Blaszczynski. This formed the basis for a lecture delivered to Macroeconomics students at CT State Tunxis in December by Prof. Blaszczynski. Having given the talk, he distributed the report to a few colleagues, whereupon I saw the value of his analysis to our larger community and asked his permission to publish it at Action Academe. —J.I. Abbot

A. Trump’s Business Instincts

Trump does have some very positive business instincts:  

1. His tax cuts are very pro-investment and the resulting significant increase in investment spending was a major reason for the great economy in Trump’s first term and is producing similar positive result in the current term.  The increase in investment spending has had both the Keynesian effect of increasing overall spending, as well as the long-term effect of economic growth from increasing economic capital.

   
   

2. Trump’s de-regulation has had a similar impact on the economy, by virtue of reducing the cost of doing business.  Of course, some regulations, such as some quality or interoperability standards, actually have a positive impact on the economy.   So, we are talking about the other kind.  Many non-economists tend to underestimate the impact of this type of de-regulation.  Some economists see it as comparable to a significant fiscal stimulus policy. 

   
   

3. Trump has it right on energy policy, promoting foreign investment, and trade deals.  Increasing energy production reduces prices, which together with foreign investment and trade grows the economy, wages, income and wealth.  Some of the economics of this are explained below.  The rest is left for another time.  The focus of the balance of this paper is a critique of Trump’s policies.

B. Tariffs & Protectionism

1. Protectionism means setting- up barriers to restrict imports and protect domestic industries from foreign competition.  Trump seems to be a most ardent proponent of such restrictions.    Trump fails to recognize that wide-ranging tariffs on all countries that he is imposing will be paid by our consumers, not the foreign producers.  If the tariff were limited to one or a few goods and a specific country, and the same goods were available from other sources, then the country subject to our tariff would suffer, though not because it would pay the tariff.  And the harm to our consumers would be limited.  

   
   

2. However, a tariff on a specific country and a specific good would not generate much revenue as we simply would buy from other sources that are not subject to the tariff.  The price will likely be higher but not necessarily by very much.  But Trump seems to regard tariff revenue as a major element of the policy.  He even makes the absurd claim that tariffs could largely replace income tax revenue.  To accomplish this the tariffs would have to be so high that they would cause the collapse of international trade and thus yield little to zero revenue.

   
   

3. While the domestic producers who are protected by the tariffs do benefit, their gain is dwarfed by the loss to consumers.  So, tariffs impose significant harm on the economy of the country imposing them.  And the uncertainty introduced by Trump’s vacillation on the specific size of the tariffs and their application also harms the economy.   Of course, the current policy of tariffs imposed on all countries also harms our trading partners.  

   
   

4. Perhaps, some of Trump’s advisors convinced Trump to moderate his policy and he is hinting that the whole tariff thing is a stratagem to get other countries to negotiate reductions in their tariffs against our exports.  If we applied the tariffs selectively on one or a few countries at a time, such a strategy would make sense.  Especially if we sought to reduce tariffs on both sides, theirs, and ours, this would be of great benefit to our country and our trading partners.   But Trump still wants to end up with an increase in our tariffs.

   
   

5. Obviously, tariffs also harm the country whose goods are subject to tariffs.  And there may be non-economic reasons for imposing tariffs.  For example, we may wish to limit our dealings with a country such as China for political, strategic, or even ethical reasons.  But here Trump’s motivation seems unclear.  Instead of our overdependence on China for key commodities, their theft of our intellectual property, or their threat to our national security, he keeps talking about our negative balance of trade as the reason to impose tariffs on China.  In this, his rhetoric belies a deep ignorance of economics [See next section]. 

   
   

6. If Trump would comprehend the real issues we might have with China, he might not have scuttled the TPP (Trans-Pacific Partnership) agreement at the outset of his first term.  The TPP encompassed 40% of global trade and all the major countries of the Pacific rim except China.  Had we signed on we would have been able to dictate terms on which to allow China to join.  Now we must wonder who is isolating whom?  And Trump’s scuttling the TPP was a mistake of epic proportions.

   
   

C. Balance of Trade

1. Trump’s griping about our balance of trade deficit is grossly ignorant.  He claims that our trading partners who have a trade surplus with us are somehow exploiting or cheating us.  If this were true then we might wonder why our per capita income, our employment, and economic growth have outpaced all our major trading partners.  The reality is quite the opposite to what Trump is claiming.  And worse, a lot of folks seem to agree with his view, including some politicians and media pundits.  

   
   

2. Trump appears to think of our economy as if it were a hardware store, where if you buy more than you sell you are losing.  But the “United States hardware store” can print its own money.  When we have a trade deficit that means that we have gained something of value, like a Toyota car or Jamaican rum, in exchange for something that has no value – a bunch of “I owe you” notes – which is what dollars are.  If the foreigners hold such dollar balances and ask as for nothing in return, then we have gotten the Toyotas and the rum for free.  

   
   

3. When foreigners use dollars as a reserve currency or as international currency, we do indeed profit. The dollar is held by central banks and governments as reserve currency because it is most reliably convertible to other currencies and goods.  And the dollar as international currency means it is the medium of exchange in trade among other countries.  In both cases, these dollar balances abroad likely resulted from our balance of trade deficit, and they do not come back to the U.S. demanding goods of real value.  So, we profit in real terms for each dollar that does not come back.  Or, to repeat the statement in the previous point above, we have gotten the Toyotas and the rum for free.  

   
   

4. On top of that, when countries use dollars as international currency, American banks make money providing the banking services facilitating these transactions.  This also allows us to impose a sanction against countries by denying them this service and making it terribly difficult for them to conduct international trade.

5. What else happens to the dollar balance held by foreigners?  Many will use the money to invest in the American economy.  This benefits us greatly by increasing our workers’ productivity, wages, income, and overall economic growth.  Yet another use for the dollar balances held by foreigners is to buy U.S. government bonds – i.e. lending to our government.  So perhaps before balancing our trade, we should balance our government budget.

   
   

6. Perhaps the most fundamental economic principle is that wealth is created not by production or consumption but by commerce.  Producing a bunch of widgets that just pile up in the backyard only creates a lot of junk.  It stays worthless until someone buys it and makes use of it.  In a normal economic system, commerce will only happen if both parties to the exchange benefit.  So, it is mutually beneficial exchange that is key to the creation of wealth.  The more exchange, the more wealth created.  And what is true for domestic commerce is just as true for international trade.  

   
   

7. Nor does commerce or trade have to be balanced for both parties to benefit.  Both parties benefit even in one-way trade.  For example, consider your purchase of a bag of potato chips from the local drug store.  You put a dollar on the counter and walk off with the chips.  Did anyone lose?  Both parties benefited because you value the chips more than the dollar and the drug store owner values the dollar more than the chips.  But this was one-way trade.  The drug store owner did not buy anything from you.  Someone, please explain this to President Trump.

D. De-Industrialization & Investment

1. Mr. Trump also decries the supposed de-industrialization of our economy.  What happened to our manufacturing, he asks?  Actually, it is thriving, but it doesn’t employ as many workers as it used to.  The value of manufacturing output is growing, but GDP is growing faster – in large part because of trade induced specialization.  Manufacturing was 10.2 % of U.S. GDP In 2023, and it employed 15.6 million or 9.7% of total U.S. employment.  Our manufacturing was 15.1% of the global total, second only to China’s 31.0 %, and more than the entire Euro area.  

   
   

2. The transition from manufacturing to services mirrors the prior transition from farming to manufacturing.  Both sectors now produce record value with a lot less workers.  And both led to higher productivity and wages for labor.  As for boosting manufacturing, the best way to do that is to reduce the cost of energy.  So, here Trump has got it right: “drill baby drill.”

   
   

3. Trump’s penchant for making deals has him bragging about getting the rest of the world to commit to invest in the United States economy trillions of dollars.  As a general proposition, boosting investment in our economy is a very good thing.  But for these promised commitments to be fulfilled, the American government’s business-and-energy-friendly policy and regulatory environment must extend past Mr. Trump’s term of office.  We might also recognize that the US has always been favored by foreign investors, so some of this investment would likely happen even without Trump’s exhortations.

E. Immigration 

1. In the aftermath of tragic and or criminal events involving immigrants, Trump is quick to express really base and stupid emotions, saying things like “we don’t want these people.”  Of course, a lot of folks in the country agree with him.  He is good at discerning the mood of the base segment of our population and currying their support by expressing the same mood.  Not that these Trump followers are evil, but they are not the more sensitive or thinking kind either.  Nor are Trump supporters limited to these types.  

   
   

2. The obvious question to ask is:  Whom is he talking about?  Who are “these people”.  The most straightforward interpretation is that he is talking about Afghans, folks from African “shithole countries” (to borrow a phrase from Trump’s lexicon), or perhaps some Latin Americans.  He is not talking about Norwegians.  A kind interpretation might be that he means criminals and terrorists.  But if so, why isn’t he making that rather crucial distinction?  In this light his remarks appear to be blatantly racist.

3. And to make matters worse, he is not only talking about barring “these people” from entering the country or reexamining the visas of those who are already here, but he is even talking about revoking their citizenship.  This is not a common remedy, but all this will unnecessarily frighten many innocent people.

   
   

4. In his more rational mood, Trump has made some reasonable proposals for reforming our immigration system to be more responsive to our labor shortages and thus to better serve our economic interests, a common practice in all countries.  But instead of arguing for reforming the immigration system Trump’s rhetoric makes any such discussion politically impossible. 

   
   

5. Of course, he is right that the Biden administration immigration policy, if one can call it that, was  utterly irresponsible and foolish.  For that matter, our immigration system has needed reform for decades.  In the 1960’s we used to vet immigrants from countries of interest (back then it was Communist countries) not only by our consulates interviewing visa applicants but also having the FBI interview newly arrived immigrants, their neighbors, and their employers.  And then they would normally repeat these interviews a couple of years later.  Immigrants were required to mail a card reporting their current address every January.  We ended these procedures sometime in the 1970’s.  There were also problems with the process of issuing visas, where decisions were often arbitrary, which invited corruption and certainly did not serve our national interest. 

   
   

6. So instead of scoring points with the less enlightened among our citizens, he should be calling for comprehensive or at least major immigration reform, so that the system better serves our national interest.  And yes, in an orderly process, review past decisions and the ostensible vetting of many immigrants already here, as well as reinstitute a proper vetting process of new immigrants.

F. International Relations 

1. President Trump’s personal relations and transactional approach to politics have produced significant success.  Instead of Obama’s and Biden’s pro-Iranian and by extension anti-Arab policy Trump’s relations with several leaders in the Arab world as well as Israel, yielded the significant success of the Abraham Accords in his first term, and to its pending expansion to include all the major Arab countries in the current term.  It is possible that Trump’s Middle East Peace Plan may succeed, and if it does, he will indeed deserve the Nobel Peace Prize.  However, the key to success is Hamas disarming and giving up power.  Trump has threatened that if Hamas fails to disarm, we will disarm them.  So, the real key is whether Hamas see the threat as real, in other words whether they believe he is willing to act on it.

   
   

2. Based on Trump’s action against Syria in his first term in office it appears that unlike his immediate predecessors, he understands the danger of making empty threats, whether specific (Obama’s “red line”) or vague (Biden’s “don’t”).  When you threaten military action, sometimes you actually have to demonstrate that your threats are not empty.   

   
   

3. But can we assume Trump intends to make good on his threats given the significant dissonance in his pronouncements on questions of war and peace?  On the one hand, he not only promises to use force against Hamas but also threatens military intervention in Nigeria to stop the killing of Christians.  On the other hand, he rails against “forever wars”, “nation building”, pronounces an “America First” foreign policy, and like many Presidents, want to avoid putting American “boots on the ground”.  He wants to be known as a peacemaker as he uses trade to bribe nations to back away from armed conflicts. 

   
   

4. Trump idealistically justifies military action for the sake of stopping genocide or the use of chemical weapons.  In justifying an attack on Syria in 2017 Trump pronounced that "It is in this vital national security interest of the United States to prevent and deter the spread and use of deadly chemical weapons."  But then he suggests we should have taken oil as payment for freeing Iraq from Saddam Hussein’s tyranny.  And similarly, asked for payment for helping Ukraine (in rare earths from Ukraine and cash from Europeans).   This does suggest a somewhat unique theory of “a just war” in Trump’s thinking which has more to do with how the war is fought than why.  Of course, this is different from the usual notion of a just war being one of defense against aggression.  

   
   

5. However, Trump’s thinking is likely more about his gross ignorance of history and philosophy than any sophisticated moral calculus.  To Trump’s mind Russia’s claim that Ukrainians are not a real nation as a justification for conquest of Ukraine carries more weight than the sovereign Ukrainian nation defending against the aggression.  He proudly showing off his knowledge by telling us that until 1913 the American government did not collect income taxes and was funded by tariffs, so we could now substitute tariffs for income taxes.  But he does not recognize the enormous difference in scale of the government budget prior to World War I versus today.   

   
   

6. Were Trump a bit less ignorant he might reflect on the logic and implications of his pronouncement about chemical weapons.  In section C6 above it is argued that the source of wealth and income is mutually-beneficial-exchange, in other words commerce, including international trade.  Were Trump to learn economic history he would realize that (a) international trade is a major source of our economic success, (b) that throughout history it is trading countries that become great powers, and (c) that they have learned that protecting trade routes is key to their economic success and their power.  Furthermore, international commerce and trade require a relatively peaceful world.  Thus, it is in our national interest to foster peaceful international relations and keep open trade routes.   

   
   

7. A corollary is that it is in our national interest to oppose blatant aggression, such as the unprovoked Russian invasion of Ukraine in 2022.  We need not always be the world’s policeman, but ignoring aggression imposes costs on us too by fostering more conflicts which impose not only the direct costs of conflict but also the cost of income-not-created because of the resulting reduction in commerce.  Therefore, an “America first” policy should not be isolationist.  Regarding so-called “forever-wars” and “nation-building” we should recognize that our most successful foreign interventions were in Germany and Japan, where we still have armed forces 80 years later.  The result of our current penchant of leaving ASAP makes us an unreliable ally, and it makes us and the world less peaceful and less prosperous.   As for “boots on the ground” given that most tyrants are cowards, if they believe we are willing to put our boots on their ground, that it the very thing that can make it unnecessary.  So please let’s keep them guessing. 

   
   

8. Finally, it is not only in our national interest to oppose aggression, but it might also be our ethical duty as often we are the only power capable of keeping the peace.  This logic might also justify intervening in other countries to depose particularly odious dictators such as Maduro of Venezuela, especially if he is engaged in the drug trade which contributes to the poisoning of our citizens.  So, our asking the President of Venezuela to resign might indeed be justified on moral grounds.  However, the moral case would be much stronger if we also applied similar logic to other equally odious dictators.  We may not always have to intervene to bring them down, but we should at least be consistent in our rhetoric.  Trouble is that President Trump has a soft spot for some mass-murdering dictators such as Putin of Russia.

G. War and Peace in Ukraine 

1. Following the infamous confrontation in the White House between Ukrainian President Zelenskyy and the President and Vice President of the United States, Trump and Vance claimed that Zelenskyy failed to thank the American nation for our help.  But in fact, Zelenskyy went out of his way to thank us profusely on numerous occasions.  Perhaps he did not thank us for the specific deal being offered by Trump.  But beyond the merits of the arguments, the behavior of Trump and Vance was crude and beneath the dignity of their office.  They shouted down Zelenskyy and didn’t allow him to speak.  They behaved like uncivilized thugs, making Vance’s reference to American Diplomacy seem an oxymoron. 

   
   

2. So, what was President Trump offering the Ukrainian President?  Prior to Zelenskyy’s visit, Trump started talking with Putin without any Ukrainian representation.   And fresh from these talks with the Russians, President Trump and his VP made it clear that the U.S. will not give Ukraine any security guarantees, that NATO membership was out of the question, as was the return of all Russian occupied Ukrainian territory.  So, the man who wrote “The Art of the Deal” gave away in advance of the actual negotiation the most important things that Ukraine might hope to secure.  One might ask, what was left to negotiate?  More Ukrainian territory?  

   
   

3. Then Trump called Zelenskyy a dictator and accused him of starting the war.  And to top it off the Trump Administration opposed a UN resolution naming Russia the aggressor and joined the likes of North Korea and Belarus in an alternative resolution without such a distinction.  

   
   

4. Zelenskyy might be excused for having the impression that opposing Russian aggression was in the national interest of many European NATO members and by extension in the American national interest as well.  He imagined Ukraine would be considered an ally.  But to Zelenskyy’s surprise, Trump’s words and deeds conveyed a very different perception.   So, when Vice President Vance extolled the achievement of American Diplomacy, Zelenskyy asked how this diplomacy was going to help Ukraine, or secure peace for that matter?  After all, Ukraine can surrender without the help of the United States.

   
   

5. Then there is the rest of Trump’s deal:  Ukraine was asked to grant American companies concessions to develop Ukraine’s rare earth deposits and grant the Americans a 50% share of the resulting profits.  And according to Trump, the American share of profits was to reimburse the United States for the assistance we have provided thus far, not what we may provide in the future.  Instead of any security guarantee, President Trump assured Zelenskyy that the Russians would not dare re-invade Ukraine so long as American workers were there, and presumably, so long as Donald Trump was President.  

   
   

6. Trump and Vance took offense to Zelenskyy not being satisfied by these guarantees.  But even if Putin refrains from invading Ukraine while Trump is in office, he would certainly do so right after Trump left office.  And given Putin’s history of mass-murder, it is likely our workers will be withdrawn at Putin’s request.   A generous interpretation of what Trump was proposing was to make Ukraine a “Client State” of the U.S.  But the U.S. is famous for abandoning such client states, and Trump himself played a role in our abandonment of Afghanistan when he negotiated with the Taliban without the participation of the Afghan government.

   
   

7. The latest “28 point-deal” Trump offered is no better:  It does purport to offer a security guarantee, but the wording and the promise is squishy at best.   It demands surrender of territory (some not currently occupied by Russia), a limit on Ukrainian military forces, and Ukraine never joining NATO.  This is not a treaty. It is a surrender, making sure Ukraine would not be able to defend against the next Russian attack, thus guaranteeing future Russian conquest of the entire country and the end of Ukraine!  Fortunately, the Europeans and some in Trump’s Administration have been busy trying to modify this obviously pro-Russian proposal.

   
   

8. One might wonder how Trump justifies in his own mind this Ukrainian “deal”?  It seems the explanation must involve two contradictory assumptions:  One is that Ukraine is incapable of winning the war with Russia.  The other is our fear that a Ukrainian victory would cause Putin to use nuclear weapons.  These two assumptions imply that we must sell out Ukraine and compel her to surrender.  This type of diplomacy is well known to East Europeans.  It is “peace in our times” of the 1938 Munich Agreement with Hitler.   However, both assumptions are mistaken.  

   
   

9. Ukraine was very much capable of winning the war with Russia.  Most observers know about the Russian weakness in logistics.  But the more important weakness is the Soviet/Russian distrust of their junior officers.  From the 1918-1922 Civil War to the Invasion of Ukraine, Russian junior officers were poorly informed, poorly trained, and not empowered to make tactical decisions in the field.  The one exception is the takeover of Crimea which was carried out by the Russian Special Forces.   While we could walk through every military engagement in the last 100 years, consider just World War II, in which everyone knows the Russian army played a key role.  In the wake of the Russian army their wounded soldiers screamed that they were not shot by the Germans but by the NKVD from the back.  This was not an army with a functioning command structure, but a horde pushed from the back.  The Russian army made up for this weakness with ruthlessness and huge casualties of soldiers used as cannot fodder.  

   
   

10. One of their favorite battle tactics was to lay an artillery barrage on enemy territory and advance their infantry into the same territory.  Many died from this friendly fire, but when the barrage ended, and the Germans came out of their foxholes, the Russians were already on top of them.  This tactic may explain part of the 10 million Russian military casualties in that war.  

    
    

11. The other assumption involving Putin’s nuclear threat is most critical.  Our last three Presidents have reacted with weakness to these threats.  Obama cancelled the Missile Defense system in East Europe, Biden made sure to limit the type, quantity and range of weapons provided to Ukraine – just enough to keep Ukraine from losing, but never enough to win the war.  And Trump screamed that Zelenskyy was  playing with World War III – an obvious reference to the fear of Putin’s nukes. 

    
    

12. What seems to escape the thinking of our Presidents is that Putin may be the worst sort of human being, a mass murder, a sociopath, but he is not an idiot.  Nor does he have a suicidal bone in his body.  The only Western leader who has kept his wits about him is French President Macron who replied to Putin’s threat noting that Russia is not the only nuclear power.  Unlike our Presidents, Macron understands that the key to the Mutual Assured Destruction doctrine is that both parties must believe the other will not hesitate to retaliate an attack.  The behavior of our last three Presidents raises doubt about this assumption, thus increasing the risk of nuclear war.  Therefore, it is not a Ukrainian victory that threatens to lead to World War III, but the perceived weakness of American Presidents. 

Andre Blaszczynski is Professor of Business and Economics at CT State Tunxis.