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Business

Opinion: Trump in offside position

The US president-elect is promising an economic miracle, including the creation of millions of new jobs at home. Yet DW's Rolf Wenkel believes that he won't be able to live up to his promises.

At his first press conference in months, US President-elect Donald Trump once again conveyed his idea of what his country's trade policy should be all about.

He wants to see tougher trade restrictions, calling the NAFTA free trade accord into question and talking about imposing punitive tariffs on imports from Mexico. On top of that, he wants Mexico to finance a US-Mexican border wall that he believes should be erected as soon as possible.

He's threatened carmakers with hefty import tariffs, should they continue to produce vehicles for the American market abroad, particularly in Mexico. He's now extending his threat to basically all industries, and pharmaceutical businesses in particular, saying that imports are bad for the US, as in his view they cost jobs at home.

Running a state like a business empire?

The real estate tycoon has not missed an opportunity to declare that he's going to run the state like a business. He compares the federal trade balance with a company's balance sheets. If the balance is negative, the state is in the red, he argues - if it's positive, the state logs profits.

Trump once told the "New York Times" during his election campaign that the US was losing about $800 billion (752 billion euros) annually because of current trade imbalances.

Wenkel Rolf Kommentarbild App

DW business editor Rolf Wenkel

His understanding of the economy is reminiscent of the mercantilism that was strongest between the 16th and 18th centuries. Behind that mercantilism was an effort to expand a state's political clout and military might by actively supporting domestic market players and increasing that state's trade surplus.

Absolutist governments supported those objectives by supporting domestic makers of finished products, while slapping hefty tariffs on imports.

"Unfortunately, mercantilist views are making inroads again with Donald Trump's help," says Rolf Langhammer, a former vice president of the Kiel Institute for the World Economy.

Exports are good

It's a naive and populist take on things that may backfire soon. Morgan Stanley experts have said that import tariffs of between 20 and 45 percent on Mexican products may provide a boost to the US economy in the first year. But they also say a hard landing will follow thereafter, with US growth to point downward in the long term. US exporters would earn less because of higher production costs at home; investments would decrease and consumer prices would rise.

"We can only hope that Trump has good advisers to steer him away from such a course," said Rolf Langhammer. They could also help the president-elect understand that 80 percent of job losses in the US in the past few decades have not come about because of globalization, free trade and open markets, but because of higher productivity levels, rationalization and automation.

Trump has made a lot of promises. He wants to initiate an infrastructure program worth $1 trillion, and he wants to "be the greatest jobs president that God ever created." He wants to lower taxes and at the same time reduce public debt.

Financial markets surely know that his plans have little to do with the realities on the ground. Stock markets have not factored that in yet, as many investors still need to realize they've been fooled by a common barker. When the turnaround comes, some will just say we've seen a technical correction on financial markets. Others will be more straightforward in their analysis and will tell us that the Trump bubble has finally burst.

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