Imagine if President Trump signed his signature tax-cut legislation last December—and then resolved to keep his hands off the economy, unless there was an emergency.
It’s likely the stock market, which is down for the year, would be up handsomely instead. The United States would be getting along with its allies instead of picking trade fights with most of them. CEOs would be more confident, and farmers wouldn’t be worrying about getting shut out of important foreign markets. Republican odds of keeping control of Congress next year would probably be higher.
That’s not what is happening. As an encore to his tax-cut legislation, which businesses generally applauded, Trump has spent 2018 threatening tariffmania, which businesses generally condemn. Trump’s latest move, announced May 29, is a vow to impose tariffs of 25% on $50 billion of Chinese technology imports, beginning in mid-June. That news contributed to a stock market selloff (as did political chaos in Italy.)
And that is just the start of the economic protectionism Trump wants to impose. He has already put in place new tariffs on steel and aluminum, while exempting some countries but not others, in a pattern that seems strangely arbitrary. He ordered the Commerce Department to study the possibility of new tariffs on Toyotas, Volkswagens and 8 million other imported cars Americans buy each year. Trump could raise the stakes with China as well, since he previously said he was mulling tariffs on $150 billion on Chinese imports, three times the amount targeted by his latest policy.
A cloud over financial markets
If Trump had signed the tax-cut bill in December, and spent the rest of the time since then golfing rather than trade-warring, he’d be lording it over a rosy economy instead of jousting with trading partners. Trump’s trade disruptions…