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What a Trump's economic agenda could look like if he's re-elected

SCOTT DETROW, HOST:

Throughout his time in the White House, former President Donald Trump loved to brag about how much, according to him, he was doing for the economy.

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DONALD TRUMP: From the instant I took office, I moved rapidly to revive the U.S. economy, slashing a record number of job-killing regulations, enacting historic and record-setting tax cuts and fighting for fair and reciprocal trade agreements.

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DETROW: That was from Trump's final State of the Union address in February 2020, which was probably in many ways the high watermark of his administration. Since he had taken office, employers had added more than 6 million jobs, unemployment had dropped to a low 3.5%, and the stock market had soared nearly 47%. No president has total control of the economy, of course, but that never stopped Trump from claiming credit.

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TRUMP: Our agenda is relentlessly pro-worker, pro-family, pro-growth and most of all, pro-American.

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DETROW: But in a few weeks, it would all come crashing down as the coronavirus spread rapidly throughout the world. Here's Trump addressing the country from the Oval Office back in 2020.

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TRUMP: From the beginning of time, nations and people have faced unforeseen challenges, including large-scale and very dangerous health threats. This is the way it always was and always will be. It only matters how you respond, and we are responding with great speed...

DETROW: Lockdowns aimed at stopping the virus threw nearly 22 million people in the U.S. out of work and sent the stock market into a freefall. Trump and his supporters like to gloss over that last part, focusing instead on the sunnier first three years of his time in office, the good times, which Trump insists he can restore if he's granted a second term.

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TRUMP: Starting on my first day back to the Oval Office, I will end Joe Biden's inflation nightmare, rescue our economy, and we will do one thing that's going to work very quickly and fast - drill, baby, drill. We're going to drill, baby, drill.

DETROW: With Donald Trump now poised to capture the Republican presidential nomination, we are going to drill down on some of the specifics of what a second Trump term could look like. A few weeks ago, we looked at the Department of Justice and how much pressure Trump could put on the courts and the criminal justice system. And today we are going to look at economic policy - policies like tariffs, which were a big part of Trump's first term when he launched trade wars with China and many of America's allies. He has suggested that he would like to go further in a second term, telling Fox Business that he supports a 10% tariff on all imports, no matter where they come from.

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TRUMP: I think when companies come in and they dump their products in the United States, they should pay automatically, let's say, a 10% tax. That money would be used to pay off debt. It's a massive amount.

DETROW: Trump is also campaigning on extending tax cuts that Congress passed in 2017, even though they contributed to a ballooning federal deficit that topped a trillion dollars a year before the pandemic.

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TRUMP: I will make the Trump tax cuts permanent.

DETROW: Some of Trump's economic policy is straight out of the traditional Republican playbook, like his support for fossil fuels or his push for deregulation. But much of Trump's economic agenda carries his own signature stamp. It's more populist, more nativist and more unpredictable.

NPR's Scott Horsley covered the White House during the first two years of the Trump administration, and he now covers the economy as a whole for NPR. And he joins us now to take a deeper dive into what a second Trump term could mean for the economy. Hey, Scott.

SCOTT HORSLEY, BYLINE: Good to be with you.

DETROW: And it's always good to have you and talk to you. And let's start with trade, which really hovered over so much of the first Trump administration's economic agenda. Trump was so aggressive about imposing tariffs when he was president. How did that work and what might we expect in the way of trade policy if he comes back to the White House?

HORSLEY: You're right. Tariffs were one of the former president's favorite tools. He used them to punish bad behavior, as with China, and also as a bargaining chip to extract concessions from friendlier trading partners like Canada and Mexico. Some of those other countries fought back against Trump's tariffs with retaliatory import taxes of their own, and that tended to hurt U.S. exports. Trump's goal with a lot of the tariffs was to protect American jobs and American industry. But while taxing imports did cost China some business in the U.S., it didn't necessarily help workers here at home. Other countries, like Vietnam and Mexico, generally picked up the slack instead. Now, Trump is talking about building an even higher wall around the U.S. market with a 10% tariff on all imports. Paul Winfree, who served in Trump's domestic policy council last time around and now heads the Economic Policy Innovation Center, thinks that would be a step too far.

PAUL WINFREE: I understand what the former president's trying to do, but ultimately that would not help the population that he's trying to help. It would raise prices, and ultimately people would be worse off.

HORSLEY: You know, the trade wars in Trump's first term often backfired economically, but they did have a lot of political appeal, especially for people who feel like they've been left behind in the global economy. As a result, we've seen significant movement in Trump's direction on trade over the last seven years or so.

DETROW: Right. And what are some examples of that?

HORSLEY: Well, for example, President Biden has left most of the Trump tariffs in place, and he's also added some of his own protectionist measures, despite protests from some of America's longtime trading partners. Mary Lovely is a senior fellow at the Peterson Institute for International Economics, which generally promotes free trade. She is dismayed by all this but acknowledges Trump has really reshaped the debate.

MARY LOVELY: The conversation has absolutely shifted. The gains from trade have clearly been discounted. I think that the gains of protection to workers and the economy have been vastly overstated.

DETROW: So let's shift now to taxes because Trump and his Republican allies in Congress, even though they weren't able to do other things like repeal Obamacare, they did push through a big tax cut in 2017. Parts of that law are set to expire next year. So when it comes to taxes, what is at stake in the presidential contest?

HORSLEY: Yeah, the tax cut was one of the signature accomplishments of Trump's first term in office. It slashed the corporate tax rate from 35% all the way down to 21%. It also cut individual tax rates. There is disagreement about how much that spurred economic growth. GDP did grow faster the year after the tax cut was passed, but that growth spurt didn't really last. Most of the benefits of the tax cut went to wealthy families, but regular folks might have enjoyed a little bump in their take home pay.

The tax cut certainly did not pay for itself, as its backers had claimed it would. You know, the government collected less money in taxes than it otherwise would have and had to take on trillions of dollars in additional debt. In order to keep the overall price tag in check, lawmakers wrote the law so the individual tax cuts would expire next year. What we know from experience is it's awfully hard for Congress to unwind a tax cut once it's been passed. That's why William Gale, who's co-director of the Tax Policy Center, says most of the individual tax cuts are likely to be extended no matter who wins this year's presidential race.

WILLIAM GALE: Why? - because the Republicans want them extended. Biden has a no-new-tax-increase on people with income under 400,000. So I'm guessing the changes for people in the bottom 95% of the income distribution are going to go through, and maybe the Democrats make a heroic stand against the top 1% or the top 5% or something like that.

HORSLEY: That's pretty much what happened when the Bush tax cuts expired more than a decade ago. By the way, extending the individual Trump tax cuts would likely add another 3- or $4 trillion to the federal debt over the next 10 years.

DETROW: And that's a good point. Then-Vice President Biden played a key role in extending those Bush tax cuts at that moment.

Such a big part of Trump's agenda the first time around - and now in this third run for the White House - is his opposition to immigration. Here he was in Iowa earlier this month.

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TRUMP: As soon as I take the oath of office, I'll terminate every open border policy of the Biden administration and begin the largest deportation operation in American history.

DETROW: When it comes to the policies Trump is pushing in immigration and the way he talks about immigration, there are obviously a lot of different things to talk about. But let's talk about the economics of it right here.

HORSLEY: Yeah. Trump's anti-immigrant sentiment is finding a lot of allies, not only among Republicans but also some Democrats. Certainly, no one is happy about the current situation at the southern border. It's important to remember, though, during his first term, Trump not only tried to build a border wall - not paid for by Mexico, by the way, but by U.S. taxpayers - he also cracked down on legal immigration, you know, suspending the issuance of green cards and work-based visas, even though as an employer, he has relied on immigrant workers both at Mar-a-Lago and Bedminster. I'll just say the rebound in immigration under President Biden is a big reason the U.S. has managed to keep growing the economy and adding jobs without putting more upward pressure on inflation. Last year, for example, the foreign-born workforce in the U.S. grew by 5%, while the native-born workforce grew less than 1%.

DETROW: We're talking about, on one hand, you know, tax cuts, which is a traditional Republican point of view, but on the other hand, this really protectionist policy, which goes so much against of what the Republican Party was for several decades in recent history. How much has Trump reshaped the Republican Party and Republican economic policies?

HORSLEY: You know, some of the things Trump advocates are straight out of the traditional GOP hymnal, you know, cutting red tape or promoting domestic energy production. These are policies that would have been very much at home in a George Bush or even a Mitt Romney White House. But in lots of other ways, Trump has gone his own way - more populist, less libertarian. And a new generation of GOP lawmakers has followed him on that path. Back in 2016, nobody was really prepared for Trump to win the White House, including Donald Trump himself. So at least at first, he had to surround himself with a lot of conventional Republican people and policies. Oren Cass, who heads the conservative think tank American Compass, thinks a second Trump administration would look very different from the first.

OREN CASS: Donald Trump coming in, in 2016, sort of had Paul Ryan plans on the shelf. And eight years later, I think you have a fairly deep bench of folks who really do want to take the Republican Party in a very different direction.

HORSLEY: Now, Cass is quick to add that Trump is not exactly a disciplined politician, so any predictions about where he might go are risky. But it's safe to say, at least in the early years of the first Trump administration, the president was at least somewhat constrained by all the establishment types around him. If there is a second Trump White House, you're not going to see those guardrails. Trump is likely to surround himself with hard-line loyalists who will empower him, not stand in his way. And if that happens, then we'll see what a full flowering of the Trumpist agenda might look like.

DETROW: That is NPR's Scott Horsley. Scott, thanks so much.

HORSLEY: You're welcome.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Scott Horsley
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.