I used to think a million monkeys banging on typewriters could come up with better economic policies than Donald Trump. Then I figured one monkey with a stylus and a can of Play-Doh could do the job. Now I think if a monkey ate a box of typewriter ribbons, waited a couple of days, and then flung its poo at Larry Kudlow’s forehead, we’d finally get the sober, reasoned trade policy we all deserve.
Unfortunately, we don’t have that option, because we’re stuck with Donald Trump.
And — surprise, surprise — people have noticed.
And guess what, that’s not good!
A recent CBS MoneyWatch story noted that the fallout from Trump’s windmill-skewering trade wars could soon be upon us. The story’s author mentioned the $200 billion in tariffs the Trump administration recently announced, and concluded — duh — that the costs will almost certainly be passed on to American consumers and companies, putting a serious strain on both the U.S. and global economy.
Perhaps the most eye-opening portion of the story, however, is a throwaway comment about foreign investment, and a link to a little-noticed July Foreign Affairs column by Adam S. Posen titled “How Trump is Repelling Foreign Investment.”
Conclusion: We’re screwed:
This year, net inward investment into the United States by multinational corporations—both foreign and American—has fallen almost to zero, an early indicator of the damage being done by the Trump administration’s trade conflicts and its arbitrary bullying of companies and governments. This shift of corporate investment away from the United States will decrease long-term U.S. income growth, reduce the number of well-paid jobs available, and reinforce the ongoing shift of global commerce away from United States. That shift will subject the entire world economy to greater instability.
Posen notes that Q1 foreign investment has fallen every year — and precipitously — since Trump took over, from $146.5 billion in 2016, to $89.7 billion in 2017, and $51.3 billion in 2018.
The reason? “The falloff is a result of a general decline in the United States’ attractiveness as a place to make long-term business commitments.”
That’s pretty chilling, considering that the seeds of these horrible policies have barely begun to germinate.
Yet the post-American economic world, one where all investment is more uncertain and politicized—because the U.S. government acts toward businesses as any self-enriching autocracy would—is on its way. That is apparent in business decisions about large, long-term investments, such as the building of major production facilities; foreign takeovers of, and mergers with, U.S. companies; and investment in research facilities and workers. These are reliable indicators of how markets really see Trump’s policies affecting the future. Unlike speculative flows of capital or indicators of sentiment, these kinds of corporate investment decisions must be taken with ten-, 20-, or 30-year time horizons in mind, and once undertaken, they are difficult to reverse.
Indeed, we’ve already seen how Trump’s shortsightedness affects foreign business decisions. Earlier this week, Alibaba CEO Jack Ma announced that he’s canceling a commitment to create 1 million jobs in the U.S., citing Trump’s increasingly belligerent stance on trade.
Trump can brag all he wants about the current state of the economy, but all he’s done since he took over is bury landmines. His ill-timed fiscal stimulus, in the form of an absurdly pro-plutocrat tax cut, is poised to irresponsibly balloon the deficit. And now his trade war is slowly isolating us economically from the rest of the world.
These good times won’t last forever, and when a recession does come — and make no mistake, Trump will own that recession — our ability to respond through sound fiscal policy by creating a well-timed stimulus will be almost nil.
Trump is drunk-driving us into a tree and too few people are telling him to slam on the brakes.
Hopefully, we’ll survive this with just a few scrapes and bruises.