A fact that shows that they are economic fraudsters again and again, their ideas are not credible, but they keep coming back.from Wapo:
…his top economic adviser…to develop a trade-focused economic plan for his presidential campaign… Including former senior White House officials Larry Kudlow and Brook Rollins, as well as outside adviser Stephen Moore and former House Speaker Newt Gingrich…
Two observations:
- The main “big idea” seems like a really bad idea.
“I think when companies come in and dump their product into the US, they should automatically pay, say, a 10% tax.” (business insider)
If you feel a sense of déjà vu, that’s understandable. Did the Section 232 and Section 301 Tariffs “Win the (Trade) War”? Just a reminder of what happened to the non-oil trade balance/net exports (the gross trade balance looks similar):
figure 1: Net exports excluding oil, in billions of dollars, SAAR (blue, left axis), and % of US GDP (tan, right axis). Light orange indicates Section 232 and Section 301 tariffs. Recession peak-to-trough dates as defined by NBER are grayed out. Sources: BEA Q2 2023 pre-release, NBER, and authors’ calculations.
For a discussion of other counterproductive aspects of Trump’s tariff war, see e.g. here.
2. If the idea is to run on the back of a Biden administration’s poor economic performance (maybe still bad), it could be a rough ride. Consider the latest forecast and instant forecast for US GDP.
figure 2: GDP (black bold), SPF median (red), WEO forecast (orange squares) and GDPNow at 8/16 (teal squares), all in billions of Ch2012$, SAAR. Source: BEA 2023Q2 advance release, philadelphia fedThe International Monetary Fund’s July World Economic Outlook, atlanta fedand the authors’ calculations.
As noted elsewhere, negative GDP quarters have become less of a consensus over time. Obviously, the fact that the outlook is likely to improve as all data is going to be revised, especially when considering GDP figures, points to the possibility of a real hard landing as more data becomes available (inflation falls) Smaller (provided there are no huge negative surprises).
What about negative term spreads? The indicator still points to a recession. Interestingly, the implied year-on-year growth rate for industrial production remains fairly modest.
