President Trump’s election is evidence of the fact that many people were against the Democratic Party’s economic policies. However, the new administration’s commerce and trade policies have also been criticized as “trade protectionism”, mainly by the media. Even if Trump aspired to become a dictator, the current US political system would demand that he obtain support from a majority of citizens.
Based on the campaign pledges and the House Republican tax reform blueprint released during the election, one gets the impression that Trump is trying to bring the United States into the international corporate tax reduction competition and reestablish its position as a key location in the manufacturing industry, where corporate tax rates had previously seemed too high compared to other countries.
The competition in corporate tax reduction is a location issue for corporations, who must decide which region or country is the most cost effective place for their manufacturing bases. America’s previous administrations have historically been conservative with corporate tax reductions, making it one of the world’s leading countries with high corporate tax rates. Due to those comparatively high corporate tax rates, manufacturing corporations who would have otherwise had their bases in the United States have now moved to other countries. We should remind ourselves that American corporations have not been building factories abroad because they wanted to. Also, President Trump is making the automobile and pharmaceutical industries, which run on an economy of scale, the focus of his trade policies. If Trump’s claims are limited to specific industries such as the current automobile and pharmaceutical industries, then the “trade protectionism” criticism is incorrect.
Furthermore, countries seriously attempting to combat unfair trade are probably relieved that Trump is clearly ready to deal with that issue. He has decided to impose anti-dumping tariffs on Chinese made materials, and the Department of Commerce has calculated an anti-dumping tax rate of 372.81%. According to presidential advisor Scaramucci, “If America demonstrates the will and the policies to punish unfair trade, that may stop the so-called ‘bad attitudes’ of our trading partners”. That is exactly right. China has had no qualms about publishing data full of contradictions, and fraudulently settling accounts across the country. The Trump administration has also called China “the grand champion of currency manipulation”. It is only a matter of time before China sheds its false skin of economic growth.
The combination of tax reductions and increased infrastructure investments Trump is aiming for may be able to free the United States of its long-term stagnation. However, it is necessary to verify whether the policy is in line with the actual situation and feasible. Also, we have to keep our eyes on whether President Trump’s promise is just insincere words or not.